Year of the Constitution 2022
Titulinė skaidrė
Teismo sudėtis
Salė
Vytis
Lt Fr

On the entry into force of tax laws

Case no 7/2020-17/2020

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA
IN THE NAME OF THE REPUBLIC OF LITHUANIA

RULING
ON THE COMPLIANCE OF THE PROVISIONS OF THE LAWS OF THE REPUBLIC OF LITHUANIA THAT ARE RELATED TO CHANGES IN THE LEGAL REGULATION OF TAXES WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

13 May 2021, no KT67-N6/2021
Vilnius

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Elvyra Baltutytė, Gintaras Goda, Vytautas Greičius, Danutė Jočienė, Giedrė Lastauskienė, Algis Norkūnas, Daiva Petrylaitė, Janina Stripeikienė, and Dainius Žalimas

The court reporter – Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1 and 531 of the Law on the Constitutional Court of the Republic of Lithuania, at the hearing of the Court on 13 April 2021, considered, under written procedure, constitutional justice case no 7/2020-17/2020 subsequent to:

(1) the petition (no 1B-1/2020) of a group of members of the Seimas of the Republic of Lithuania, the petitioner, requesting an investigation into whether:

paragraph 3 of Article 20 of the Republic of Lithuania’s Law on the Legislative Framework and paragraph 4 of Article 3 of the Republic of Lithuania’s Law on Tax Administration, insofar as they establish that the rule of entry into force of tax laws of the Republic of Lithuania not earlier than six months after the date of their official publication does not apply to the amendments (supplements) of tax laws related to the Republic of Lithuania’s laws amending (supplementing) tax laws are in conflict with paragraph 2 of Article 5 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

paragraph 1 of Article 8 of the Republic of Lithuania’s Law Amending Articles 9, 10, 26, 35, 37, 61 and 67  of the Law (No IX-569) on Excise Duty, which was adopted on 3 December 2019, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Republic of Lithuania’s Law on Excise Duty came into force on 1 January 2020; paragraph 2 of Article 8 of the Republic of Lithuania’s Law Amending Articles 9, 10, 26, 35, 37, 61, and 67 of the Law (No IX-569) on Excise Duty, which was adopted on 3 December 2019, under which paragraph 1 (wording of 3 December 2019) of Article 26 of the Republic of Lithuania’s Law on Excise Duty came into force on 1 March 2020, paragraph 1 of Article 2 of the Republic of Lithuania’s Law Amending Articles 1, 2, 3, 30, and 31 of the Law (No IX-569) on Excise Duty and Amending Articles 8 and 9 of the Law (No XII-1327) Amending Chapters II and III, which was adopted on 5 December 2019, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Republic of Lithuania’s Law on Excise Duty came into force on 1 March 2020; paragraph 1 of Article 3 of the Republic of Lithuania’s Law Amending Articles 6 and 7 of the Law (No X-233) on Immovable Property Tax, which was adopted on 12 December 2019, under which paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 of paragraph 1 (as amended on 12 December 2019) of Article 7 of the Republic of Lithuania’s Law on Immovable Property Tax came into force on 1 January 2020; paragraph 2 of Article 7 of the Republic of Lithuania’s Law Amending Articles 2, 6, 16, 20, 21, and 27 of the Law (No IX-1007) on Personal Income Tax, which was adopted on 28 June 2018, insofar as, under that paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Republic of Lithuania’s Law on Personal Income Tax came into force on 1 January 2020, and paragraph 1 of Article 13 of the Republic of Lithuania’s Law Amending Articles 2, 4, 12, 14, 30, 31, 55, 561 of and Appendix 3 to the Law (No IX-675) on Corporate Income Tax, as well as Supplementing the Law with Articles 383, 402, and 562, which was adopted on 17 December 2019, insofar as, under that paragraph, Article 383 (wording of 17 December 2019) of the Republic of Lithuania’s Law on Corporate Income Tax came into force on 1 January 2020, are in conflict with paragraph 2 of Article 5 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

Article 383 (wording of 17 December 2019) of the Republic of Lithuania’s Law on Corporate Income Tax is in conflict with paragraph 2 of Article 5, Article 29, and paragraph 1 of Article 69 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

paragraph 1 (wording of 5 December 2019) of Article 65 of the Republic of Lithuania’s Law on Excise Duty is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 69 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

(2) the petition (no 1B-14/2020) of a group of members of the Seimas of the Republic of Lithuania, the petitioner, requesting an investigation into whether:

paragraph 1 of Article 8 of the Republic of Lithuania’s Law Amending Articles 9, 10, 26, 35, 37, 61 and 67  of the Law (No IX-569) on Excise Duty, which was adopted on 3 December 2019, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Republic of Lithuania’s Law on Excise Duty came into force on 1 January 2020; paragraph 2 of Article 8 of the Republic of Lithuania’s Law Amending Articles 9, 10, 26, 35, 37, 61, and 67 of the Law (No IX-569) on Excise Duty, which was adopted on 3 December 2019, under which paragraph 1 (wording of 3 December 2019) of Article 26 of the Republic of Lithuania’s Law on Excise Duty came into force on 1 March 2020; paragraph 1 of Article 2 of the Republic of Lithuania’s Law Amending Articles 1, 2, 3, 30, and 31 of the Law (No IX-569) on Excise Duty and Amending Articles 8 and 9 of the Law (No XIII-1327) Amending Chapters II and III, which was adopted on 5 December 2019, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Republic of Lithuania’s Law on Excise Duty came into force on 1 March 2020, and Article 2 of the Republic of Lithuania’s Law Amending Article 5 of the Law (No IX-326) on the Tax on Lotteries and Games of Chance, which was adopted on 10 December 2019, insofar as, under that article, Paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Republic of Lithuania’s Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, are in conflict with the constitutional principle of a state under the rule of law;

paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Republic of Lithuania’s Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, as well as paragraph 1 (wording of 5 December 2019) of Article 65 of the Republic of Lithuania’s Law on Excise Duty are in conflict with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

paragraphs 2, 21, 3 of Article 5 (wording of 10 December 2019) of the Republic of Lithuania’s Law on the Tax on Lotteries and Games of Chance are in conflict with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

By the Constitutional Court’s decision of 1 April 2021, the above-mentioned petitions were joined into one case, which was given reference no 7/2020-17/2020.

The Constitutional Court

has established:

I

The arguments of the petitioners

1. The petition (no 1B-1/2020) of the group of members of the Seimas, the petitioner, requesting an investigation into the compliance of the impugned laws with the Constitution is based on the following arguments.

1.1. The petitioner doubts whether paragraph 3 of Article 20 of the Law on the Legislative Framework and paragraph 4 of Article 3 of the Law on Tax Administration, insofar as they establish that the general rule of entry into force of tax laws not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

Referring to the official constitutional doctrine formulated, inter alia, when interpreting the constitutional principles of a state under the rule of law, the protection of legitimate expectations, legal certainty, legal security, and responsible governance, the petitioner specifies that the above-mentioned legal regulation consolidated in the Law on the Legislative Framework and the Law on Tax Administration does not create the preconditions for establishing a proper period (vacatio legis) for the entry into force of amendments to tax laws to allow taxpayers to prepare for respective tax changes.

1.2. The petitioner also doubts whether the provisions (under which the amended tax laws specified by the petitioner came into force earlier than after six months) of the laws amending tax laws, which are indicated in its petition – the Law Amending Articles 9, 10, 26, 35, 37, 61 and 67 of the Law (No IX-569) on Excise Duty, which was adopted on 3 December 2019 (hereinafter also referred to as the Law Amending the Law on Excise Duty), the Law Amending Articles 1, 2, 3, 30, and 31 of the Law (No IX-569) on Excise Duty and Amending Articles 8 and 9 of the Law (No XII-1327) Amending Chapters II and III, which was adopted on 5 December 2019 (hereinafter also referred to as the Law on Amending the Law Amending the Law on Excise Duty), the Law Amending Articles 6 and 7 of the Law (No X-233) on Immovable Property Tax, which was adopted on 12 December 2019 (hereinafter also referred to as the Law Amending the Law on Immovable Property Tax, the Law Amending Articles 2, 6, 16, 20, 21, and 27 of the Law (No IX-1007) on Personal Income Tax, which was adopted on 28 June 2018 (hereinafter also referred to as the Law Amending the Law on Personal Income Tax), and the Law Amending Articles 2, 4, 12, 14, 30, 31, 55, 561 of and Appendix 3 to the Law (No IX-675) on Corporate Income Tax, as well as Supplementing the Law with Articles 383, 402, and 562, which was adopted on 17 December 2019 (hereinafter also referred to as the Law Amending the Law on Corporate Income Tax), are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

1.2.1. The petitioner has doubts concerning the compliance of the impugned legal regulation with the Constitution, inter alia, because the provisions of tax laws, which were set out in a new wording and which imposed higher taxes (tax rates) or substantially changed the legal regulation of taxes, entered into force on 1 January 2020 or on 1 March 2020, that is, in a particularly short period of time, from the day of the official publication of the impugned laws, one day to three months.

1.2.2. The petitioner points out that, under the impugned provisions of tax laws, persons subject to an additional corporate income tax, increased excise duties, amended legal regulation of immovable property tax and personal income tax were entitled to reasonably expect a reasonable period (vacatio legis) to be set during which they would be able to prepare to pay these taxes. In the opinion of the petitioner, such a procedure for the entry into force of tax laws introducing new taxes, new tax rates or substantially changing the legal regulation of taxes, where the said laws enter into force earlier than six months after the date of their official publication, could apply only in exceptional cases which are constitutionally justified, that is, when it is necessary to ensure without delay not any but vital needs of society and the state that cannot be guaranteed without establishing new taxes, without increasing tax rates, without the abolition of tax concessions, without otherwise aggravating the situation of taxpayers.

The petitioner emphasises that it is namely the stability of the tax system that is an essential constitutional value and argues that there were no exceptional, constitutionally justified circumstances justifying the entry into force of the impugned legal regulation, which introduced higher tax rates or substantially amended the regulation of taxes, within a very short period of time from the official publication of the impugned tax laws specified by the petitioner (i.e. one day to three months), there was also no possibility created for economic entities to adapt to the amendments in legal regulation (such as preparing for disproportionate costs or other negative consequences). Therefore, in the opinion of the petitioner, the legal regulation provided for in those tax laws violates the imperatives of the protection of legitimate expectations, legal certainty, and legal security stemming from the constitutional principle of a state under the rule of law and paragraph 2 of Article 5 of the Constitution.

1.3. The petitioner also doubts regarding the compliance of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax with paragraph 2 of Article 5, Article 29, and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule, insofar as this article, according to the petitioner, lays down additional corporate income tax applicable only to banks and other credit institutions and the procedure for its calculation, declaration, and payment.

1.3.1. The petitioner states that before the entry into force of the legal regulation consolidated in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, the profits of all Lithuanian and foreign taxable entities were taxed at a rate of 15 percent. However, according to the impugned Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, only specified credit institutions (banks and credit unions) have become the taxpayers of the additional 5 percent corporate income tax, which are, from the point of view of making profits, the same enterprises as those operating in other sectors of economic activity (e.g. construction, trade, transport). According to the petitioner, there are no differences between the specified credit institutions (including banks) and other private enterprises of such a nature and to such an extent that only the first ones would be subject to an additional corporate income tax and their profits could be taxed at a higher rate than the profits of other private enterprises. Thus, in the opinion of the petitioner, there is no constitutional basis and objective reasons to exclude only the specified credit institutions (banks and credit unions) from Lithuanian and foreign taxable entities and only to impose additional corporate income tax on them.

In addition, the petitioner also points out that, under the impugned legal regulation consolidated in the Law on Corporate Income Tax, not all credit institutions carrying out the same activities are subject to additional 5 percent corporate income tax; for example, this additional tax is not paid by rapid credit companies, although they, like banks, provide loans with interest to residents and make profits. Thus, according to the petitioner, such a legal regulation is in conflict with Article 29 of the Constitution and the constitutional principle of a state under the rule of law.

1.3.2. The petitioner also notes that, when establishing the legal regulation consolidated in the Law on Corporate Income Tax, no assessment of the effects of the envisaged legal regulation was made and no potential impact of this new tax on the financial market and the economy as a whole was assessed, therefore, paragraph 1 of Article 15 of the Law on the Legislative Framework was violated, under which, when drawing up a draft legal act which provides for regulation of previously unregulated relations, also whereby legal regulation is substantially amended, the assessment of the effect of envisaged legal regulation must be carried out. Furthermore, when consolidating the impugned legal regulation, the provision of paragraph 4 of Article 127 of the Treaty on the Functioning of the European Union was not taken into account, i.e. the European Central Bank has not been consulted. Thus, in the opinion of the petitioner, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 69 of the Constitution.

The petitioner also notes that the legal regulation laid down in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax entered into force in a particularly short period of time, thus denying the imperatives of the protection of legitimate expectations, legal certainty, and legal security, which stem from the constitutional principle of a state under the rule of law. According to the petitioner, when planning their activities, credit institutions (including banks) expect that no conditions will be imposed which will unduly complicate their financial, economic activities and thus suffer losses, other negative consequences.

1.4. The petitioner also has doubts concerning the compliance of paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, under which an excise duty rate of EUR 113.2 per one kilogram of tobacco applies to incandescent tobacco products, with paragraph 2 of Article 5 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

1.4.1. The petitioner specifies that the legal regulation laid down in the Law Amending Articles 1, 2, 3, 30, and 31 of the Law (No IX-569) on Excise Duty and the Law (No XIII-1327) Amending Chapters II and III, which was adopted on 28 June 2018, established a gradual increase (within three years) of excise duty rates applicable to all categories of tobacco products by 2021. According to the petitioner, the adoption of that law gave rise to a legitimate expectation that the excise duty rates for incandescent tobacco would be gradually increased over several years (EUR 68.6 per kilogram of tobacco as of 1 March 2019, EUR 78.5 as of 1 March 2020, and EUR 90 as of 1 March 2021). The impugned paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty disregards the formerly provided gradual increase of excise duty rates; in addition, only for one category of tobacco, i.e. incandescent tobacco, it is expected to immediately increase the excise duty rate from EUR 68.6 to EUR 113,2 (up to 65 percent) from 1 March 2020. Therefore, a particularly significant and rapid increase in the excise duty rate on incandescent tobacco products in accordance with paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, in the opinion of the petitioner, violated the imperatives of the protection of legitimate expectations, legal certainty, and legal security stemming from the constitutional principle of a state under the rule of law and paragraph 2 of Article 5 of the Constitution.

1.4.2. The petitioner also specifies that the legal regulation established in the impugned paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, which, according to the petitioner, has a substantial impact on both the competitive and business environment, was consolidated without having made the impact assessment of such a legal regulation, which is necessary under paragraph 1 of Article 15 of the Law on the Legislative Framework. Since, according to the petitioner, the impugned legal regulation established in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty was consolidated without complying with the requirements for the legislative process laid down in laws, the legislature violated paragraph 1 of Article 69 of the Constitution.

2. The petition (no 1B-14/2020) of the group of members of the Seimas, the petitioner, requesting an examination into the compliance of the specified impugned laws with the Constitution is based on the following arguments.

2.1. The doubts of the petitioner concerning the compliance of the provisions of the Law Amending the Law on Excise Duty, Law on Amending the Law Amending the Law on Excise Duty, and the Law Amending Article 5 of the Law (No IX-326) on the Tax on Lotteries and Games of Chance, which was adopted on 10 December 2019 (hereinafter also referred to as the Law Amending Law on the Tax on Lotteries and Games of Chance), under which, the amendments of the Law on Excise Duty and the Law on the Tax on Lotteries and Games of Chance came into force earlier than three months after the date of their official publication, with the constitutional principle of a state under the rule of law are virtually based on the same arguments as those regarding the compliance of the provisions of the laws amending the tax laws impugned in the petition (no 1B-1/2020) establishing the time limit of less than six months for their entry into force with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

2.2. The petitioner also has doubts regarding the compliance of the impugned provisions of the Law on Excise Duty, which increased the rates of excise duty on ethyl alcohol, unleaded petrol, gas oils, inter alia, gas oils intended for use in the production of agricultural products, including aquaculture or commercial fishing in inland waters, by operators of agricultural activities, as well as incandescent tobacco products, with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution and the constitutional principles of a state under the rule of law, the protection of legitimate expectations, legal security, legal certainty, proportionality, and justice.

2.2.1. The doubts of the petitioner concerning the constitutionality of the provisions of the Law on Excise Duty are virtually based on the same arguments as in the petition (no 1B-1/2020), inter alia, on the fact that the impugned paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty disregards the formerly provided gradual increase of excise duty rates; in addition, only for one category of tobacco, i.e. incandescent tobacco, the excise duty rate is increased immediately from EUR 68.6 to EUR 113,2 (up to 65 percent) from 1 March 2020.

The petitioner also states that, by means of the legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, and paragraphs 1 and 3 of Article 37 (wording of 3 December 2019) of the Law on Excise Duty, the legislature respectively increased excise duty rates only for certain products – ethyl alcohol, unleaded petrol, gas oils, and, at the same time, under paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, the legislature increased the excise duty rate applicable to only one category – incandescent tobacco. However, according to the petitioner, in the absence of a crisis situation in the state, due to such a radical increase in certain excise duty rates, business representatives start to mistrust the entire legal business environment and to question the state’s compliance with its obligations, thus, the constitutional principles of the rule of law, the protection of legitimate expectations, legal certainty, legal security, proportionality, and justice have been violated.

2.2.2. According to the petitioner, under the impugned provisions of the Law on Excise Duty, by having increased the rates of excise duty and the fixed amounts of this tax only for certain products (ethyl alcohol, unleaded petrol, gas oils, incandescent tobacco products), a competitive advantage is unreasonably granted to economic entities producing, selling or using other types of products in their activities. In the opinion of the petitioner, the establishment of increased excise duty rates has a substantial impact both on the competitive environment and on the business environment, in particular for economic entities who choose the production (e.g. winter crop) to be cultivated in the following year when planning their activities on an annual basis and pre-assess the costs of their activities. Moreover, in view of the fact that different market participants have chosen different types of fuel for their agricultural machinery, increasing the excise duty rates applicable only to fuels used by a certain part of the market participants not only undermines the legitimate expectations of certain economic entities, but also confers an unjustified competitive advantage on individual market participants. Therefore, the impugned provisions of the Law on Excise Duty unduly worsened the situation of market participants producing ethyl alcohol, as well as unleaded petrol, gas oils (especially used by operators of agricultural activities) or using them in their activities, and not other fuels, inter alia, by having increased their operating costs, the conditions for unfair competition were created, and, therefore, paragraph 4 of Article 46 of the Constitution was violated.

2.3. The doubts of the petitioner concerning the constitutionality of paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, under which higher than previous tax rates were established for the organisation of respective games of chance, are virtually based on the same arguments as concerning the constitutionality of the provisions of the Law on Excise Duty.

The petitioner also specifies that the impugned legal regulation prescribed in the Law on the Tax on Lotteries and Games of Chance increased the rates of gaming tax and fixed amounts of this tax, respectively, only for one category of services – gaming, thus, a competitive advantage is unreasonably granted to lottery organisers. According to the petitioner, by means of such a legal regulation, the legislature created the conditions for unfair competition; thus, paragraph 4 of Article 46 of the Constitution has been violated.

2.4. The petitioner also specifies that the legal regulation consolidated in the provisions of the Law on Excise Duty and the Law on the Tax on Lotteries and Games of Chance, which, according to the petitioner, has a substantial impact on both the competitive and business environment, was established without having made the impact assessment of such a legal regulation, which is necessary under paragraph 1 of Article 15 and Article 161 (wording of 13 June 2019) of the Law on the Legislative Framework. Thus, the impugned legal regulation was consolidated without complying with the requirements for the legislative process laid down in laws; therefore, in the opinion of the petitioner, the legislature violated paragraph 1 of Article 69 of the Constitution.

II

The arguments of the representatives of the party concerned

3. In the course of the preparation of the case for the hearing of the Constitutional Court, written explanations were received from Valius Ąžuolas, the then Chairperson of the Seimas Committee on Budget and Finance, acting as the representative of the Seimas, the party concerned, in which it was maintained that the impugned legal regulation was not in conflict with the Constitution. The position of the representative of the Seimas, the party concerned, is based on the following arguments.

3.1. In the opinion of the representative of the party concerned, the legal regulation laid down in paragraph 3 of Article 20 of the Law on the Legislative Framework and paragraph 4 of Article 3 of the Law on Tax Administration, under which the general rule of entry into force of tax laws not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, is not an objective in itself, it is related to the state budget of the relevant year. According to the provisions of the impugned laws, the exception to the general rule that tax laws enter into force not earlier than six months after their official publication applies only to the amendments of tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year.

3.1.1. The representative of the party concerned recognises that tax laws, as legal acts determining the main source of revenue for the state budget, should be amended in conjunction with the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, if this is necessary to ensure the collection of revenue of the state budget. The obligations assumed by the state by means of laws must in all cases be based on material and financial resources, otherwise these laws would become ineffective, and the state’s ability to take account of the needs of society and the state would be substantially limited. Otherwise, the legal bases and principles of the formation of the Lithuanian budgetary system, as enshrined in the Constitution, would be denied, since neither the Government nor the Seimas would be allowed to exercise the powers of these institutions consolidated in the Constitution with regard to the establishment and implementation of the state budget.

3.1.2. The representative of the party concerned refers to the provisions of the official constitutional doctrine set out in the ruling of the Constitutional Court of 15 February 2013 on the duty of the legislature to provide for a proper vacatio legis and states that the impugned legal regulation should not in itself be considered to be incompatible with the Constitution, inter alia, paragraph 2 of Article 5 thereof, the constitutional principle of a state under the rule of law, since public interests and the concern to protect other values consolidated in the Constitution may outweigh the interest of a person to have more time to adapt to the new legal regulation. The legislature must have appropriate instruments for this purpose.

3.2. With regard to the provisions of the laws amending the tax laws impugned in the petition, under which they came into force earlier than six months after the date of their official publication, the representative of the party concerned notes that, under the Constitution, the state budget is prepared annually on the basis of specific economic indicators, the real situation in the economy and the priorities of the state. Thus, when considering and adopting the Republic of Lithuania’s Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020 (hereinafter also referred to as the Law on State Budget for 2020), the Seimas had to take account of the economic situation of the country and to provide for the necessary financial, material, and other resources for the fulfilment of the obligations undertaken by the state.

3.2.1. According to the representative of the party concerned, the impugned draft laws amending the tax laws linked to the Law on the State Budget for 2020 and affecting the state budget revenue and expenditure were prepared at the same time as the draft Law on the State Budget for 2020. When preparing draft laws under such a procedure, the legislature may not deviate from the imperative consolidated in paragraph 2 of Article 131 of the Constitution that the Seimas may increase the expenditure provided that it specifies financial sources for the additional expenditure; therefore, this was how it ensured that all expenditure provided for in the draft Law on the State Budget for 2020 would have a source of financing.

In addition, according to the representative of the party concerned, the laws amending the tax laws linked to the Law on the State Budget for 2020 did not provide for any new taxes; they only established the increased rates of the existing taxes or reduced the value of non-taxable property; therefore, additional revenue could have been planned in the State Budget for 2020. Since the changes in taxes provided for in the Law on the State Budget for 2020 had to ensure that the interests of the state and society as a whole were respected, the time limit for the entry into force of these taxes were in line with the requirements of the Constitution.

According to the representative of the party concerned, under paragraph 2 of Article 131 of the Constitution, any decisions to increase state budget expenditure must be based on the law and there must be a specific source of financing for the estimated costs of the state budget. Thus, in anticipating the need for additional funds, the Government, as the preparer of the draft state budget, had no choice but to submit to the Seimas the impugned draft laws related to the Law on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020 together with the draft Law on the State Budget for 2020.

3.2.2. As regards the arguments of the petitioner concerning the possibilities for taxpayers to prepare to pay additional taxes, the representative of the party concerned notes that, under all the specified laws amending the tax laws impugned by the petitioner, which came into force on 1 January 2020, the real deadline for payment of the taxes, and thus the time limit for the tax to become chargeable, is much later than 1 January 2020 (for instance: residents are obliged to pay immovable property tax before the last day of the time limit for submitting the return, which may be 15 December of the current tax period or 15 February of the following calendar year, and the advance payment of immovable property tax – on 15 March, 15 June and 15 September of the current calendar year; the personal income tax must be declared and paid before 1 May of the calendar year following that tax period; the additional corporate income tax established for banks and credit unions must be paid on a quarterly basis, not later than the 15th of the last month of each quarter of the tax period; the tax period for excise goods is the calendar month following which the amount of payable excise duty must be paid by the 15th day of the following month). Thus, taxpayers have a real opportunity to prepare for the relevant amendments of tax laws, since the time limit for the introduction of the tax liability in question, as indicated, is much later than the time limit for the entry into force of the impugned legal regulation.

Therefore, the arguments set out by the petitioner are, according to the representative of the party concerned, unfounded and the provisions of the laws amending the impugned tax laws are not in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of the rule of law.

3.3. The representative of the party concerned notes that the profits of entities holding a banking licence (banks, including branches of foreign commercial banks, credit unions, central credit unions) were charged with an additional 5 percent corporate income tax, which, under Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, must be paid by banks and credit unions. This group of entities was chosen on the basis of objective criteria: having regard to the scale of the activity, where taxation is linked to a fixed profit threshold (i.e. EUR 2 million), and to the fact that, in accordance with paragraph 1 of Article 27 of the Law on Corporate Income Tax, the specified entities are entitled to deduct special provisions from their income when calculating corporation tax, thus, according to the representative of the party concerned, reducing corporate income tax (during the tax period, these entities are allowed to deduct from income special provisions for doubtful assets set up to cover the losses arising from a particular doubtful asset (group of doubtful assets)). Therefore, in the opinion of the representative of the party concerned, the arguments of the petitioner that a different legal regulation was established in the absence of objective circumstances which would justify such differences and, therefore, the principle of equal rights was not respected, should be considered unjustifiable.

The representative of the party concerned also states that the impugned legal regulation consolidated in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax has not introduced new taxes, it has introduced the rate of 5 percent of the additional corporate income tax of the entities that had already been the taxpayers of corporate income tax. Thus, in the opinion of the representative of the party concerned, the provision of paragraph 1 of Article 15 of the Law on the Legislative Framework (under which, when drawing up a draft legal act which provides for regulation of previously unregulated relations, also whereby legal regulation is substantially amended, assessment of the effect of envisaged legal regulation must be carried out) should not have been applied in this particular case, and the arguments of the petitioner due to the fact that the impugned legal regulation does not comply with Article 69 of the Constitution as consolidated in breach of the procedure for adopting laws, should also be regarded as unjustifiable.

3.4. Furthermore, according to the representative of the party concerned, it is clear from the explanatory note to the draft Law (No XIIIP-4019) on Amending the Law Amending the Law on Excise Duty that, by consolidating the legal regulation in paragraph 1 (wording of 3 December 2019) of Article 65 of the Law on Excise Duty establishing higher rates of excise duty for incandescent tobacco products from 1 March 2020, the legislature sought, inter alia, to reduce the substitution effect of cigarettes (the market share of sold incandescent tobacco increased from 0.4 percent in 2017 to 6.5 percent in 2019, while the consumption of cigarettes decreased accordingly during that period), and, thus, also to contribute to the achievement of the health improving objectives.

The representative of the party concerned emphasises that the impugned legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 65 of the Law on Excise Duty did not introduce new taxes, it established higher rates of excise duty for incandescent tobacco products. Therefore, the said provision of paragraph 1 of Article 15 of the Law on the Legislative Framework should not have been applied in this particular case. In view of this, in the opinion of the representative of the party concerned, there is no ground for stating that the impugned legal regulation was consolidated in breach of the procedure for adopting laws and, thus, paragraph 1 of Article 69 of the Constitution was violated.

4. In the course of the preparation of the case for the hearing of the Constitutional Court, written explanations were received from Mykolas Majauskas, the Chairperson of the Seimas Committee on Budget and Finance, acting as the representative of the Seimas, the party concerned, in which it was maintained that the legal regulation impugned in petition no 1B-14/2020 is not in conflict with the Constitution. The position of the representative of the Seimas, the party concerned, is based on the following arguments.

4.1. The position of the representative of the party concerned regarding the compliance of the provisions of the laws amending the tax laws, specified in petition no 1B-14/2020, under which the amended provisions of respective tax laws came into force earlier than six months after the date of their official publication, with the constitutional principle of a state under the rule of law is essentially the same as the position and arguments of the representative of the party concerned presented with regard to the constitutionality of the laws specified in petition no 1B-1/2020 of the petitioner.

In addition, in the explanations of the representative of the party concerned regarding petition no 1B-14/2020 of the petitioner, it is noted that the impugned legal regulation leaves the possibility of adopting appropriate amendments to the tax laws, when approving the state budget for each year. Thus, analogous amendments to tax laws are adopted on the annual basis when drawing up the state budget; otherwise, the legal bases and principles of the formation of the Lithuanian budgetary system, as enshrined in the Constitution, would be denied.

4.2. The position of the representative of the party concerned regarding the compliance of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, Article 37 (wording of 3 December 2019), and paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, and paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, specified in petition no 1B-14/2020, with the constitutional principle of a state under the rule of law is based, inter alia, on the fact that excise duty and the tax on lotteries and games of chance are an important source of revenue for the state budget and amendments to these laws were necessary to ensure the formation and execution of the state budget. Moreover, since the actual time limit for payment of the taxes imposed is later than the date of entry into force of the relevant impugned provisions, there is no ground for stating that economic entities had no time to prepare for tax changes.

The representative of the party concerned, having regard to the provisions of the official constitutional doctrine relating, inter alia, to the legal regulation of economic activities, including with a view to protecting human health, notes that the Constitution, inter alia, Articles 46 and 53 thereof, gives rise to the requirement that, when regulating the relations of economic activity in the area of organising games of chance and taking account of the fact that organising games of chance may result in negative consequences for the health of people, public order, and the security of members of society, the legislature may and, in certain situations, also must establish limitations and prohibitions on the activity of organising games of chance. Thus, the impugned legal regulation was established in order to achieve the objective of improving human health, i.e. to protect the public from harm caused by games of chance.

4.3. As regards the compliance of the impugned legal regulation established in the Law on Excise Duty and the Law on the Tax on Lotteries and Games of Chance, specified in petition no 1B-14/2020, with paragraph 1 of Article 69 of the Constitution, from the aspect that, when establishing this regulation, no assessment of the effect of legal regulation and no impact assessment on competitive environment were carried out, the position of the representative of the party concerned is based on the same arguments as the position of the representative of the party concerned regarding the compliance of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax and Article 65 (wording of 5 December 2019) of the Law on Excise Duty with paragraph 1 of Article 69 of the Constitution, specified in petition no 1B-1/2020.

III

The material received in the case

5. In the course of the preparation of the case for the hearing of the Constitutional Court, a written opinion was received from Vilius Šapoka, the then Minister of Finance of the Republic of Lithuania.

The Constitutional Court

holds that:

I

The scope of investigation

6. As mentioned before, the group of members of the Seimas, the petitioner, requests an investigation (petition no 1B-1/2020) into whether:

paragraph 3 of Article 20 of the Law on the Legislative Framework and paragraph 4 of Article 3 of the Law on Tax Administration, insofar as they establish that the rule of entry into force of tax laws of the Republic of Lithuania not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020, paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, under which paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty came into force on 1 March 2020, paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, under which paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020, paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, insofar as, under that paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020, and paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, insofar as, under that paragraph, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax came into force on 1 January 2020, are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax is in conflict with paragraph 2 of Article 5, Article 29, and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law;

paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

6.1. The petition makes it clear that, when applying to the Constitutional Court, the petitioner impugns the constitutionality of paragraph 3 of Article 20 of the Law on the Legislative Framework and paragraph 4 of Article 3 of the Law on Tax Administration to the specified extent.

It should be noted that, after having accepted the petition at the Constitutional Court for consideration, paragraph 3 of Article 20 of the Law on the Legislative Framework Law was amended by the Republic of Lithuania’s Law Amending Article 20 of the Law (No XI-2220) on the Legislative Framework, which was adopted by the Seimas on 23 June 2020.

It should also be noted that after having accepted the petition at the Constitutional Court for consideration, paragraph 4 of Article 3 of the Law on Tax Administration was amended by the Republic of Lithuania’s Law Amending Article 3 of the Law (No IX-2112) on Tax Administration, which was adopted on 23 June 2020, as well as by the Republic of Lithuania’s Law Amending Article 3 of the Law (No IX-2112) on Tax Administration, which was adopted on 30 June 2020.

6.2. Paragraph 4 (wording of 11 July 1996) of Article 69 of the Law on the Constitutional Court prescribes that the annulment of an impugned legal act constitutes the grounds for adopting a decision to dismiss the instituted legal proceedings.

The Constitutional Court has held that the wording “shall be grounds […] to dismiss the instituted legal proceedings” of paragraph 4 (wording of 11 July 1996) of Article 69 of the Law on the Constitutional Court should be interpreted as establishing that, in cases where not courts and not the persons specified in paragraph 4 (wording of 21 March 2019) of Article 106 of the Constitution but other subjects specified in Article 106 of the Constitution have applied to the Constitutional Court, and where an impugned legal act (part thereof) is no longer valid – it has been declared as no longer valid (it was repealed or amended) or its validity has expired, the Constitutional Court, when taking account of the circumstances of the considered case, has the powers to dismiss the instituted legal proceedings, and it should not be interpreted as establishing that, in every case, when the impugned legal act (part thereof) is repealed, the instituted legal proceedings must be dismissed (inter alia, the rulings of 25 November 2019, 3 November 2020, and 19 April 2021).

6.3. It has been mentioned that the group of members of the Seimas, the petitioner, applied to the Constitutional Court requesting an examination into the compliance of paragraph 3 of Article 20 of the Law on Legislative Framework and paragraph 4 of Article 3 of the Law on Tax Administration to the specified extent. As mentioned above, it has doubts whether the rule of entry into force of tax laws not earlier than six months after the date of their official publication may be not applicable to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of each year.

6.3.1. The comparison of the legal regulation established in paragraph 3 of Article 20 of the Law on Legislative Framework, which was effective at the time of application to the Constitutional Court, with the legal regulation established in paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework shows that it has not changed from the aspect impugned by the petitioner.

6.3.2. The comparison of the legal regulation established in paragraph 4 of Article 3 of the Law on Tax Administration with the legal regulation established in paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration also shows that it has not changed from the aspect impugned by the petitioner.

6.4. In view of the above, it should be held that there are no grounds for the Constitutional Court to adopt a decision to dismiss this part of the constitutional justice case.

6.5. Thus, in this constitutional justice case, the Constitutional Court will investigate whether paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework and paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration, insofar as they establish that the rule of entry into force of tax laws of the Republic of Lithuania not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the Republic of Lithuania’s tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

7. It has also been mentioned that the group of members of the Seimas, the petitioner, requests an examination (petition no 1B-14/2020) into whether:

paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020, paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, under which paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty came into force on 1 March 2020, paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, and Article 2 of the Law Amending Law on the Tax on Lotteries and Games of Chance, insofar as, under that article, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020 are in conflict with the constitutional principle of a state under the rule of law;

paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, as well as paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty are in conflict with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law;

paragraphs 2, 21, 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance are in conflict with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

8. In the light of the foregoing, in the constitutional justice case at issue, the Constitutional Court will examine whether:

(1) paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework and paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration, insofar as they establish that the rule of entry into force of tax laws of the Republic of Lithuania not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

(2) Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax is in conflict with paragraph 2 of Article 5, Article 29, and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule, and paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, insofar as, under this paragraph, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

(3) paragraphs 2, 21, 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance are in conflict with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law and Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, insofar as, under that article, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

(4) paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, as well as paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty are in conflict with paragraph 2 of Article 5, paragraph 4 of Article 46, and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law; and paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020, paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, under which paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty came into force on 1 March 2020, paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

(5) paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, under which paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020, paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, insofar as, under that paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020, are in conflict with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

II

The provisions of the Constitution and the official constitutional doctrine relating to the adoption and entry into force of tax laws

9. In the constitutional justice case at issue, the Constitutional Court examines the compliance of the legal regulation of taxes, which, inter alia, establishes the procedure for the entry into force of the tax laws, with, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

10. The Constitutional Court has held on more one occasion that the constitutional principle of a state under the rule of law is a universal principle on which the entire legal system of Lithuania and the Constitution itself are based; it is an especially broad constitutional principle and comprises a wide range of interrelated imperatives; the essence of the constitutional principle of a state under the rule of law is the rule of law; the constitutional imperative of the rule of law means that freedom of state power is limited by means of law that must be obeyed by all subjects of legal relations, including the law-making subjects; the constitutional principle of a state under the rule of law must also be followed in the process of both making and implementing law.

10.1. The Constitutional Court has noted on more than one occasion that the constitutional principle of a state under the rule of law implies various requirements for the legislature and other law-making subjects, inter alia: in order to ensure that the subjects of legal relations are aware of the requirements put forward to them by law, legal norms must be established in advance, legal acts must be published officially, and such acts must be public and accessible (inter alia, the rulings of 13 December 2004, 15 February 2013, and 15 March 2017); in order that the subjects of legal relations could act in accordance with the requirements of law, a legal regulation must be relatively stable (inter alia, the rulings of 13 December 2004, 15 February 2013 and 19 June 2018).

10.2. Legal certainty, legal security, and the protection of legitimate expectations are inseparable elements of the principle of a state under the rule of law; these constitutional principles imply the duty of the state to ensure the certainty and stability of a legal regulation, to protect the rights of persons, to respect legitimate interests and legitimate expectations, and to fulfil the obligations undertaken to the person (inter alia, the rulings of 4 March 2003, 15 February 2013, and 7 December 2020); under the principle of legitimate expectations, the legal regulation may be changed only by following the procedure established in advance (inter alia, the rulings of 13 May 2005, 14 February 2011, and 9 July 2015); no changes in the legal regulation are allowed to deny the legitimate interests and legitimate expectations of a person; if legal certainty, legal security, or the protection legitimate expectations were not ensured, the trust of a person in the state and law would not be ensured, either (inter alia, the rulings of 4 March 2003, 15 February 2013, and 7 December 2020).

10.3. The Constitutional Court has also noted that the legislature must pay regard, inter alia, to the principle of the constitutional principle of a state under the rule of law in all cases, inter alia, in the imposition of taxes, as well as in the establishment of tax exceptions and tax concessions; the principles of clarity and determinacy of legal regulation and the principle of legal certainty are particularly important in the imposition of taxes, and, thus, in the establishment of their object, as well as of tax exceptions and tax concessions (rulings of 15 March 2000, 16 December 2013, and 7 December 2016).

The Constitutional Court has also held that the persons who, under the Constitution, must pay taxes established by law have the right to reasonably expect that, in the course of establishing or changing taxes, regard should be paid to the constitutional principle of a state under the rule of law, inter alia, the principles of legal certainty, legal security, and the protection of legitimate expectations, which implies the duty of the state to ensure the stability of the legal regulation by which taxes are established, as well as to protect and respect the legitimate interests and legitimate expectations of taxpayers (ruling of 15 February 2013).

10.4. As the Constitutional Court has held on more than one occasion, the content of the constitutional principle of a state under the rule of law must be disclosed in the light of the content of various other constitutional principles, such as responsible governance and other constitutional principles of no less importance; the constitutional principle of a state under the rule of law is also reflected in paragraphs 2 and 3 of Article 5 of the Constitution, which consolidate the constitutional principles of responsible governance and the responsibility of the authorities to society; the said paragraphs stipulate that the scope of power is limited by the Constitution and that state institutions serve the people (inter alia, the rulings of 12 April 2018 and 19 December 2019).

11. In interpreting paragraph 2 of Article 5 of the Constitution, the Constitutional Court has noted that the Seimas, as the legislative institution that passes laws and other legal acts, is independent inasmuch as its powers and its wide discretion are not limited by the Constitution, inter alia, by the constitutional principles of a state under the rule of law, the separation of powers, responsible governance, the protection of legitimate expectations, legal clarity, as well as by other principles (ruling of 19 November 2015). Under the Constitution, inter alia, paragraphs 2 and 3 of Article 5 thereof, and the constitutional principles of responsible governance and a state under the rule of law, in implementing their functions, institutions that exercise state power may not exceed the powers conferred on them by the Constitution and laws (ruling of 2 March 2018).

12. Paragraph 1 of Article 69 of the Constitution prescribes: “Laws shall be adopted at the Seimas according to the procedure established by law.”

12.1. The Constitutional Court has noted that paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law, inter alia, give rise to the requirement according to which laws and other legal acts must be adopted according to the procedure that is established in advance and is in compliance with the Constitution (rulings of 15 February 2013 and 19 November 2015); the necessity to pass laws consequently following the stages and rules of the legislative process stems from the Constitution (inter alia, the rulings of 22 February 2008 and 15 February 2013).

12.2. In the jurisprudence of the Constitutional Court, it has also been noted that, if the Statute of the Seimas or laws prescribe that a certain stage (stages) of the legislation process must include the verification of a draft law, then it is necessary, inter alia, to carry out the evaluation of the effectiveness of the regulation of relations that is sought by the relevant law, as well as an assessment whether such a law would give rise to any negative consequences; it would be constitutionally unjustified if there was a failure to carry out such verification at a certain stage of the legislation process (inter alia, in the course of the realisation of the right of legislative initiative or the adoption of laws) or if such verification were carried out not at the due stage (stages) of the legislation process (ruling of 29 February 2010).

13. Paragraph 1 of Article 70 of the Constitution is relevant for the constitutional justice case at issue and it prescribes the following: “Laws adopted by the Seimas shall come into force after they are signed and officially promulgated by the President of the Republic, unless the laws themselves establish a later date for their entry into force.”

When interpreting paragraph 1 of Article 70 of the Constitution in the context of the constitutional principle of a state under the rule of law and the principles the protection of legitimate expectations, legal certainty, and legal security, which are also the elements of the constitutional principle of a state under the rule of law and which imply the duty of the state to ensure the certainty and stability of a legal regulation, the Constitutional Court has held that changes in a legal regulation must be made in such a manner that the persons whose legal status is affected by those changes would have a real opportunity to adapt to a new legal situation; therefore, in order to create the conditions for persons not only to familiarise themselves with a new legal regulation prior to the beginning of its validity, but also to adequately prepare for the expected changes, it might be necessary to establish a later date of the entry into force of a relevant law (the beginning of the application thereof) (inter alia, the rulings of 15 February 2013 and 25 January 2016).

Thus, under paragraph 1 of Article 70 of the Constitution, as interpreted in the context of the constitutional principle of a state under the rule of law, the legislature is, in certain cases, obliged to provide for a sufficient vacatio legis, i.e. a period of time from the moment of the official publication of the particular law until its entry into force (date of its application), during which the persons concerned would be able to prepare for the implementation of the requirements resulting from that law (inter alia, the rulings of 15 February 2013 and 2 February 2016); the provision of paragraph 1 of Article 70 of the Constitution may not be interpreted as meaning that the legislature is granted an absolutely free discretion to decide whether to postpone the date of the entry into force of a law (the beginning of the application of a law) (ruling of 15 February 2013).

14. In the context of this constitutional justice case, the provisions of the official constitutional doctrine relevant to this case should be mentioned, which are linked, inter alia, to the obligation of the Seimas to establish state taxes and other compulsory payments, as well as the concept of the state budget and the drafting, consideration, and approval thereof.

14.1. The Constitutional Court has also held that taxes form an essential part of the financial system of the state and that they constitute the main part of the revenue of the state budget (inter alia, the rulings of 15 March 2000 and 7 December 2016); the establishment of taxes is aimed at receiving revenue to perform the functions of the state (municipality) and to meet the public needs of both society and the state (inter alia, the rulings of 17 November 2003 and 5 July 2013). When taxes are not paid or are overdue, the state (municipal) budget does not receive part of its revenue, and the possibilities for the state (municipality) to perform the functions established for it are limited (inter alia, the rulings of 17 November 2003 and 5 July 2013).

14.2. The Constitutional Court has also held that, according to the constitutional concept of the state budget, the state revenue and expenditure planned for the budget year must be provided for in the state budget approved by law (rulings of 14 January 2002, 15 February 2013, and 3 November 2020); all planned revenue and expenditure of the state budget must be specified sufficiently clearly by concretely indicating the state revenue sources and the estimated sums of funds that could be received from those sources (ruling of 15 February 2013).

The Constitutional Court has also noted that the constitutional concept of the state budget and the constitutional principle of responsible governance mean that the state budget must be realistic and that the revenue and expenditure provided for therein must be based upon an assessment of the needs and possibilities of society and the state (inter alia, the rulings of 15 February 2013 and 19 November 2015); when considering and approving a draft state budget, the Seimas must follow the laws that imply a certain amount of estimated state revenue and expenditure (inter alia, the ruling of 15 February 2013 and the decision of 16 April 2014).

15. In its ruling of 15 February 2013, in interpreting paragraph 1 of Article 70 of the Constitution in the context of the constitutional principles of a state under the rule of law and responsible governance, the Constitutional Court revealed the content of the legislature’s duty to establish a vacatio legis in the introduction or amendment of the legal regulation of taxes. The Constitutional Court pointed out in the said ruling that:

since the Government, when preparing a draft state budget, and the Seimas, when considering and approving it, are bound by valid laws that affect the amount of planned state revenue and expenditure and, at the same time, have the duty to predict the tendencies in the development of the economy of the state, to assess the needs and possibilities of society and the state, it may become necessary to amend such laws in a corresponding manner; if amendments to such laws established certain duties or limitations with respect to persons, regard would have to be paid to the constitutional requirement to provide for a proper vacatio legis, i.e. enough time should be left before the entry into force of those amendments (the beginning of the application thereof), so that the interested persons could properly prepare for them;

a proper vacatio legis in the sphere of tax law is an important guarantee that persons (first of all, taxpayers) would be able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements; thus, while preparing a draft state budget and considering it, it is necessary, among other things, to assess whether, prior to the approval of the state budget at the Seimas, relevant amendments should be made to tax laws and other laws that affect state revenue and expenditure where the constitutional requirement for a proper vacatio legis is applicable to the entry into force of such laws;

the time period that should be established for each concrete situation must be assessed in view of a number of circumstances: the purpose of the law in the legal system and the character of the social relations regulated by that law, the circle of subjects to whom it is applied and their possibilities of preparing for the entry into force of the new legal regulation, as well as other important circumstances, inter alia, those due to which the law must come into force as soon as possible; an important public interest, the concern to protect other values consolidated in the Constitution, outweighing the interest of a person to have more time to adapt to the legal regulation establishing new duties or limitations may determine the speedy entry into effect of the law on the day when it is officially published without any term of a vacatio legis; still, it needs to be emphasised that the speedy entry into effect of laws establishing duties or limitations with respect to persons should be an exception, based and justified on the grounds of special objective circumstances, rather than a rule;

when making amendments to tax laws (introducing new taxes, increasing the existing ones, etc.), the deviation from the constitutional requirement to provide for a proper vacatio legis is constitutionally justified only on the grounds of the aspiration to ensure an important public interest – to guarantee the stability of public finances, not to allow the rise of an excessive budget deficit in the state due to an exceptionally difficult economic and financial situation as a result of particular circumstances (an economic crisis, natural disasters, etc.) – determining the necessity of urgent and effective decisions.

16. It should be noted from the aspect relevant to this constitutional justice case that, under the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, the constitutional duty of the state to draw up a draft state budget and the constitutional duty of the Seimas to consider and approve it may not in itself be interpreted as creating the preconditions for deviating from the requirement, arising from the Constitution, to provide for a proper vacatio legis for the entry into force of tax laws, which establish duties or limitations with respect to persons. In other words, only the need to draw up and approve the state budget is not a constitutionally justifiable, particular and objective circumstance substantiating the immediate entry into force of tax laws. Otherwise, if the legislature were permitted to deviate from the constitutional requirement to provide for a proper vacatio legis for the entry into force of tax laws in the absence of a very difficult economic and financial situation as a result of particular circumstances each time when the state budget is prepared, considered, and approved, the preconditions would be created for a permanent practice of the immediate entry into force of tax laws and, therefore, the stability of the legal regulation of taxes would not be ensured and the legitimate interests and legitimate expectations of taxpayers would not be protected and respected.

It should be mentioned in this context that, under the Constitution, the requirement to provide for a proper vacatio legis for the entry into force of tax laws may be waived where the tax laws do not impose additional duties or limitations with respect to persons, but facilitate the situation of taxpayers.

III

The assessment of the compliance of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework and paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration with the Constitution

17. In this constitutional justice case, the Constitutional Court examines the compliance of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework and paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration, insofar as they establish that the rule of entry into force of tax laws of the Republic of Lithuania not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

18. The doubts of the petitioner concerning the compliance of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework with the Constitution to the specified extent are substantiated by the fact that this legal regulation creates the preconditions for not providing for a proper period of time (vacatio legis) for the entry into force of the tax laws, which introduce new taxes, new tax rates, or substantial changes in the legal regulation of taxes and which are related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, which would allow taxpayers to prepare for tax changes and to adapt their property interests and perspectives of economic activity to the said changes.

According to the petitioner, such laws could only enter into force after a very short period of time after their adoption only in exceptional and constitutionally justified cases, i.e. when it is necessary to immediately ensure not any but only vital needs of society and the state, which cannot be secured without new taxes, without any increase in tax rates, without the abolition of tax concessions, or without otherwise aggravating the situation of taxpayers.

19. Paragraph 3 (wording of 23 June 2020) of Article 20 “The entry into force of legal acts” of the Law on the Legislative Framework establishes:

Tax laws of the Republic of Lithuania imposing new taxes, new tax rates, tax concessions, sanctions for infringements of the tax laws or substantially amending the procedure of specific taxation or the principles of legal regulation of taxation and their application shall enter into force not earlier than six months after their official publication. This provision shall not apply to laws amending tax laws of the Republic of Lithuania relating to the law on the approval of financial indicators of the state budget and municipal budgets for the relevant year, legal acts whereby national law is harmonised with Union law, as well as tax laws of the Republic of Lithuania necessary during the period of exceptional circumstances as defined in the Constitutional Law of the Republic of Lithuania on the Implementation of the Fiscal Treaty.”

19.1. It should be noted that paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework consolidates the general rule on the entry into force of tax laws that tax laws introducing new taxes, new tax rates or substantially changing the legal regulation of taxes enter into force not earlier than six months after the date of their official publication, i.e. it consolidates the minimum time limit of not less than six months for the entry into force of the specified tax laws. At the same time, the following exceptions to the general rule are introduced, under which the following may come into force earlier than six months after the date of official publication:

the laws amending (supplementing) the tax laws, which are related to the law on the approval of financial indicators of the state and municipal budgets of the relevant year;

legal acts whereby Lithuanian national law is harmonised with European Union law;

tax laws of the Republic of Lithuania necessary during the period of exceptional circumstances as defined in the Constitutional Law of the Republic of Lithuania on the Implementation of the Fiscal Treaty.

19.2. It should also be noted that the legal regulation investigated in this constitutional justice case is consolidated in the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year”, which establishes one of the exceptions to the general rule on the entry into force of tax laws, according to which the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year introducing new taxes, new tax rates or substantially changing the legal regulation of taxes may enter into force not earlier than six months after the date of their official publication.

Thus, under this provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework, the legislature may apply the said exception by adopting the laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets for each year.

20. When deciding on the compliance of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework, insofar as it establishes that the rule of entry into force of tax laws not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, with the Constitution, it should be noted that, as mentioned before:

under paragraph 1 of Article 70 of the Constitution, as interpreted in the context of the constitutional principle of a state under the rule of law, the legislature is, in certain cases, obliged to provide for a sufficient vacatio legis, i.e. a period of time from the moment of the official publication of the particular law until its entry into force (date of its application), during which the persons concerned would be able to prepare for the implementation of the requirements resulting law; a proper vacatio legis in the sphere of tax law is an important guarantee that persons (first of all, taxpayers) would be able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements;

under the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, as interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, the constitutional duty of the state to draw up a draft state budget and the constitutional duty of the Seimas to consider and approve it may not in itself be interpreted as creating the preconditions for deviating from the requirement, arising from the Constitution, to provide for a proper vacatio legis for the entry into force of tax laws, which establish duties or limitations with respect to persons; in other words, only the need to draw up and approve the state budget is not a constitutionally justifiable, particular and objective circumstance substantiating the immediate entry into force of tax laws; otherwise, if the legislature were permitted to deviate from the constitutional requirement to provide for a proper vacatio legis for the entry into force of tax laws in the absence of a very difficult economic and financial situation as a result of particular circumstances each time when the state budget is prepared, considered, and approved, the preconditions would be created for a permanent practice of the immediate entry into force of tax laws and, therefore, the stability of the legal regulation of taxes would not be ensured and the legitimate interests and legitimate expectations of taxpayers would not be protected and respected.

20.1. As mentioned before, the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” consolidates one of the exceptions to the general rule on the entry into force of tax laws, according to which the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year introducing new taxes, new tax rates or substantially changing the legal regulation of taxes may also enter into force earlier than six months after the date of their official publication.

Thus, such a legal regulation creates the preconditions for the legislature not to establish any vacatio legis for the entry into force of the laws amending (supplementing) tax laws that are related to the law on approval of financial indicators of state budgets and municipal budgets of each year and that may introduce new taxes, new tax rates, or substantial changes in the legal regulation of taxes. Thus, the legal regulation consolidated in the said provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework creates the preconditions for the legislature each time when the state budget is prepared, considered, and approved, in the absence of any extremely difficult economic and financial situation as a result of particular circumstances, not to apply the general rule of the entry into force of tax laws not earlier than after six months, thus, to let the formation of a permanent practice of the immediate entry into force of tax laws, at the same time creating instability in the legal regulation of taxes, and to disregard the legitimate interests and legitimate expectations of taxpayers.

20.2. It should be held that the legal regulation consolidated in the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” disregarded the requirement, arising from the Constitution, inter alia, paragraphs 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, to provide for a proper vacatio legis for the entry into force of tax laws and not to deviate from that requirement in the absence of constitutionally justified special objective circumstances.

20.3. In the light of the foregoing, it should be concluded that the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislation Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance.

21. As mentioned before, in this constitutional justice case, the Constitutional Court also investigates the compliance of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration, insofar as it establishes that the rule of entry into force of tax laws not earlier than six months after the date of their official publication does not apply to laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

22. Article 3 “Legal regulation of taxes” (as amended on 30 June 2020) of the Law on Tax Administration lays down the following:

1. The system of tax legislation shall comprise tax laws and subordinate legal acts adopted on their basis.

2. Any tax falling within the national competence of the Republic of Lithuania can be established only by law.

3. The Seimas of the Republic of Lithuania shall ensure that the tax laws of the Republic of Lithuania establishing a new tax, a new tax rate, a tax concession and/or sanctions for violations of tax laws or substantially amending the procedure of specific taxation or the principles of the legal regulation of taxation and their application should come into effect not earlier than within six months after the day of their publication.

4. Paragraph 3 of this Article shall not apply to the amendments of tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year and to legal acts harmonised with the provisions of EU legislation, tax laws of the Republic of Lithuania necessary during the period of exceptional circumstances as defined in the Constitutional Law of the Republic of Lithuania on the Implementation of the Fiscal Treaty, as well as necessary for the purposes of declaring states of emergency or national defence, and the performance of other vital functions of the state during mobilisation or in a state of war.

5. All contradictions and ambiguities of the tax legislation of the Republic of Lithuania shall be interpreted in favour of the taxpayer.”

22.1. From the aspect relevant to this constitutional justice case, it should be noted that paragraph 3 of Article 3 of the Law on the Legislative Framework consolidates the general rule on the entry into force of tax laws that tax laws introducing new taxes, new tax rates or substantially changing the legal regulation of taxes enter into force not earlier than six months after the date of their official publication, i.e. it consolidates the a minimum time limit of not less than six months for the entry into force of the specified tax laws.

22.2. Paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration consolidates the following exceptions to the general rule, under which the following may come into force earlier than six months after the date of official publication:

the laws amending (supplementing) the tax laws, which are related to the law on the approval of financial indicators of the state and municipal budgets of the relevant year;

legal acts which are harmonised with European Union law;

tax laws of the Republic of Lithuania necessary during the period of exceptional circumstances as defined in the Constitutional Law on the Implementation of the Fiscal Treaty;

laws that are necessary for the purposes of declaring states of emergency or national defence, and the performance of other vital functions of the state during mobilisation or in a state of war.

22.3. It should be noted that the legal regulation investigated in this constitutional justice case is consolidated in the provision of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration “to the amendments of the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year”, which establishes one of the exceptions to the general rule on the entry into force of tax laws, according to which the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year introducing new taxes, new tax rates or substantially changing the legal regulation of taxes may also enter into force earlier than six months after the date of their official publication.

Thus, under this provision of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration, the legislature may apply the said exception by adopting the laws amending the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets for each year.

22.4. In this context, it should be noted that the Constitutional Court, in its ruling of 15 February 2013, interpreted the legal regulation provided for in paragraph 4 of Article 4 of the Law on Tax Administration (wording of 13 April 2004), and noted that the exemption from the rule on the entry into force of the amendments to the tax laws referred to in this paragraph may not be considered as allowing the non-compliance with the time limit for the entry into force of the tax laws laid down in paragraph 3 of this article at the time of adoption of the law on the state budget of each year; this legal regulation should only apply in exceptional cases.

23. From the aspect relevant to this constitutional justice case, it should be noted that the legal regulation consolidated in the provision of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration “to the amendments of the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year”, insofar as, under this legal regulation, the general rule of entry into force of tax laws not earlier than six months after the date of their official publication does not apply to laws amending the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year, is, in terms of its content, is identical to the legal regulation consolidated in the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislation Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year”.

It should also be noted that the compliance of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration, to the specified extent, with the Constitution is impugned on the basis of the same arguments.

23.1. Having held in this ruling that the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution, as well as with the constitutional principles of a state under the rule of law and responsible governance, on the grounds of the same arguments, it should be held that also the provision of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration “to the amendments of the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution, as well as with the constitutional principles of a state under the rule of law and responsible governance.

23.2. Taking into account the foregoing arguments, it should be concluded that the provision of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration “to the amendments of the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution, as well as with the constitutional principles of a state under the rule of law and responsible governance.

IV

The assessment of the constitutionality of paragraph 1 of Article 13 of the Law Amending the Law on Corporate Tax and Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax

24. In this constitutional justice case, the Constitutional Court examines the compliance of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax with paragraph 2 of Article 5, Article 29, and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule, as well as paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, insofar as, under this paragraph, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax came into force on 1 January 2020, with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

25. On 17 December 2019, the Seimas adopted the Law Amending the Law on Corporate Income Tax, which supplemented the Law on Corporate Income Tax by, inter alia, Article 383 (wording of 17 December 2019). The entry into force of the Law Amending the Law on Corporate Income Tax, inter alia, the provisions thereof, which supplemented the Law on Corporate Income Tax by Article 383 (wording of 17 December 2019), is regulated in the impugned paragraph 1 of Article 13 of this law.

26. As mentioned before, the petitioner impugns the compliance of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax with, inter alia, Article 29 of the Constitution and the constitutional principle of a state under the rule of law.

In the opinion of the petitioner, under the impugned legal regulation, only credit institutions (among others, banks) have become the taxpayers of the additional corporate income tax, which are, from the point of view of making profits, the same enterprises as those operating in other sectors of economic activity (e.g. construction, trade, transport). Thus, according to the petitioner, there are no objective reasons to exclude only credit institutions (among others, banks) from Lithuanian and foreign taxable entities and to impose an additional corporate tax only on them and, at the same time, a higher corporate tax rate than on other private companies with the same or even higher profits; therefore, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax is in conflict with Article 29 of the Constitution and the constitutional principle of a state under the rule of law.

27. Article 383 “Calculation, declaration, and payment of additional income tax by credit institutions” (wording of 17 December 2019) of the impugned Law on Corporate Income Tax prescribes:

1. The banks operating under the Law on Banks of the Republic of Lithuania, including branches of foreign commercial banks, credit unions operating under the Law on Credit Unions of the Republic of Lithuania and central credit unions operating under the Law on Central Credit Unions of the Republic of Lithuania, shall calculate, declare, and pay the additional corporate income tax on credit institutions in accordance with the procedure laid down in this Article.

2. Taxable profit of credit institutions, calculated as income less non-taxable income, allowable and limited allowable deductions (excluding the amount of increased deductions for the costs of research and experimental development works, the amount of the reduction in taxable income due to the production of a film or part of it free of charge, the deductible amount of the aid granted and the amount of losses in previous tax periods deducted from income from the tax period), shall be taxed at the rate of 5 percent of the additional corporate income tax of the credit institutions.

3. The provisions of Chapters IX1 and X1 of this Law shall not be taken into account for the purposes of calculating the taxable profits of credit institutions in accordance with this Article.

4. For the purposes of this Article, positive income and dividends received shall not be included in the income of a credit institution.

5. Credit institutions shall be exempt from additional corporate income tax on profits not exceeding EUR 2 000 000, calculated in accordance with paragraphs 2, 3 and 4 of this Article.

6. Credit institutions shall pay an advance additional corporate income tax of credit institutions. For the first two quarters of the tax period, the advance additional corporate income tax of credit institutions shall amount to ¼ of the amount of additional corporate income tax of credit institutions calculated in accordance with the procedure laid down in this Article for the tax period preceding the previous tax period. For the third and fourth quarters of the tax period, the advance additional corporate income tax of credit institutions shall be equal to 1/4 of the amount of additional corporate income tax of credit institutions calculated in accordance with the procedure laid down in this Article for the preceding tax period. For the first two quarters of the tax period, the advance supplementary credit institutions’ income tax return shall be submitted to the tax administration no later than the 15th day of the third month of the tax period. For the third and fourth quarters of the tax period, the advance supplementary credit institutions’ income tax return shall be submitted to the tax administration no later than the 15th day of the ninth month of the tax period. The advance corporate income tax must be paid to the state budget no later than the 15th day of the last month of each quarter of the tax period.

7. Credit institutions shall be exempt from the advance payment of additional corporate income tax by credit institutions for the first tax period within the meaning of paragraph 3 of Article 6 of this Law, whereas, for the second tax period, the advance payment of additional corporate income tax by credit institutions shall start from the third quarter. Where the tax period preceding the previous tax period was less than twelve months, when calculating the advance additional corporate income tax on credit institutions calculated in accordance with this Article, the amount of the additional corporate income tax of the credit institutions shall be divided by the number of months of that tax period and multiplied by twelve.

8. The supplementary credit institutions’ income tax return shall be submitted to the tax administration no later until the 15th day of the sixth month of the next tax period. If the amount of the corporate income tax calculated in the supplementary credit institutions’ income tax return exceeds the paid amount of the advance supplementary credit institutions’ income tax of that tax period, the resulting difference shall be paid to the state budget until the 15th day of the sixth month of the next tax period. The tax overpayment shall be recovered under the procedure of the Law on Tax Administration. For the last tax period, the supplementary credit institutions’ income tax return shall be submitted and the fee shall be paid within 30 days of the end of the activity.

9. Supplementary corporate income tax and advance supplementary corporate tax return forms for credit institutions, the procedure for completing them, and the other data required to be submitted together with the declarations shall be established by the central tax administrator.”

Thus, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax establishes a new additional corporate income tax of credit institutions. Paragraph 1 of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax establishes which entities are liable to pay a new additional corporate income tax of credit institutions, paragraph 2 of this article lays down the rate of this new tax; paragraphs 3–5 regulate the calculation of this tax; paragraphs 6 and 7 of this article establish the procedure for the payment of the new additional corporate income tax of credit institutions; paragraphs 8 and 9 of this article consolidate the procedure for declaring this tax.

27.1. It should also be noted from the aspect relevant to this constitutional justice case that, under paragraph 1 of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, only the credit institutions (banks and credit unions) specified in this paragraph are required to pay a new additional corporate income tax of credit institutions. Under paragraphs 2 and 5 of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, the specified credit institutions are subject to the new additional corporate income tax of credit institutions calculated from the proportion of the taxable profits of the credit institutions referred to above exceeding EUR 2 million per year, resulting from the deduction of non-taxable income, allowable deductions, and limited allowable deductions.

27.2. It should be noted that, under the legal regulation laid down in paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, the provisions of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax are applied for the calculation and declaration of corporate income tax for the tax periods of 2020, 2021, and 2022.

Therefore, the new additional corporate income tax of credit institutions, which is established in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, is of a temporary nature: the entities referred to in paragraph 1 of this article – banks and credit unions – are liable to pay this tax for three years.

27.3. It should be noted that it is clear from the travaux préparatoires of the Law on Corporate Income Tax that the reason for establishing an additional corporate income tax of credit institutions is that banks still benefit from favourable taxation procedure, inter alia, favourable conditions were created for deducting special provisions from income when calculating corporate income tax, thereby reducing corporate income tax, although banks’ performance is actually improving; when establishing an additional corporate income tax of credit institutions, the amount of this tax was linked to the performance of the credit institution so that no threat would be posed to the sustainability of activities of credit institutions (the conclusion of the Committee on Budget and Finance of the Seimas of 6 December 2019 on the draft Law Amending Articles 2, 4, 12, 14, 30, 31, 55, 561 of and Appendix 3 to the Law (No IX-675) on Corporate Income Tax, as well as Supplementing the Law with Articles 383, 402, and 562).

28. Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, which is impugned by the petitioner and which lays down a duty for the specified credit institutions (banks and credit unions) to pay an additional corporate income tax of credit institutions, should be interpreted in conjunction with the provisions of this law regulating the corporate tax rate and the calculation of taxable profits.

28.1. The following provisions of the Law on Corporate Income Tax should be mentioned from the aspect relevant to this constitutional justice case:

a 15 percent tax rate shall be imposed on the taxable profits of Lithuanian entities and permanent establishments (point 1 (wording of 9 December 2009) of paragraph 1 of Article 5);

for the purpose of calculating taxable profits of a Lithuanian entity, the following shall be deducted from income: non-taxable income, allowable deductions, and limited allowable deductions (paragraph 1 of Article 11);

allowable deductions are all the usual entity’s costs actually incurred for such activities which are necessary to earn the entity’s income or to obtain economic benefit, all expenses for the benefit of employees, provided that these benefits are the object of personal income tax (paragraph 1 (wording of 29 June 2012) of Article 17);

limited allowable deductions shall be: depreciation or amortisation costs of fixed assets; operating, repair and renovation costs of tangible fixed assets; costs of the travel on official assignments; costs of advertising and representation; natural losses; taxes; bad debts; expenses for the benefit of employees and/or their family members where the benefit is not the object of personal income tax; special provisions of credit institutions and insurance undertakings; sponsorship; membership fees, payments and contributions; losses for the tax period; interest (points 1–13 of paragraph 2 (as amended on 6 December 2018) of Article 17);

banks and credit unions which establish special provisions for covering doubtful assets of credit institutions in accordance with the rules laid down by the Bank of Lithuania shall, during a tax period, be allowed to deduct from income special provisions for doubtful assets set up to cover the losses arising from a particular doubtful asset/group of doubtful assets (paragraph 1 (wording of 17 November 2011) of Article 27); where a credit institution settles its claims relating to repayment of debts, the amount of the debt or a part thereof corresponding to the amount of the special provision set up in respect of such debt shall be recognised as income at the moment of settlement of the debt claim (paragraph 2 of Article 27).

Thus, under point 1 (wording of 9 December 2009) of paragraph 1 of Article 5, paragraph 1 of Article 11, paragraph 1 (wording of 29 June 2012), and paragraph 2 (as amended on 6 December 2018) of Article 17 of the Law on Corporate Income Tax, all Lithuanian entities have an obligation to pay the corporation income tax of 15 percent on the taxable profit of the entity liable for this tax, which is the part of the income derived from the total income less deductions of the defined types of income: non-taxable income, allowable deductions, and limited allowable deductions.

It should be noted from the aspect relevant to this case that point 9 of paragraph 2 of Article 17 of the Law on Corporate Income Tax establishes that one of the types of deductions allowed for the reduction of taxable profits is the special provisions for credit institutions and insurance undertakings, paragraph 1 (wording of 17 November 2011) and paragraph 2 of Article 27 prescribe the procedure for deduction of special provisions as well as special provisions for only credit institutions – banks and credit unions: the income received by those credit institutions are allowed, in addition to other fixed deductions, to deduct the special provisions for the settlement of doubtful assets of credit institutions to cover losses of a particular doubtful asset (a group of assets in question). This means that, under point 9 of paragraph 2 of Article 17 and paragraph 1 (wording of 17 November 2011) and paragraph 2 of Article 27 of the Law on Corporate Income Tax, banks and credit unions pay corporate income tax on a relatively lower proportion of income received (taxable profits) than other economic entities.

28.2. Thus, under point 9 of paragraph 2 of Article 17 and paragraph 1 (wording of 17 November 2011) and paragraph 2 of Article 27 of the Law on Corporate Income Tax, the taxable profit of only banks and credit unions, which, as mentioned above, pay an additional 5 percent corporate income tax under Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, in addition to the general corporate income tax of 15 percent, is calculated differently from those of all other persons paying corporate income tax: when calculating the taxable profit of banks and credit unions, the income received by them are allowed, in addition to other deductions, to deduct the special provisions for only banks and credit unions – special provisions for the settlement of doubtful assets of credit institutions to cover losses of a particular doubtful asset. This means that, although under the impugned Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, banks and credit unions pay an additional 5 percent corporate income tax, for them corporate income tax is calculated on taxable profit, the calculation of which permits additional deductions not allowed for other economic entities, i.e. banks and credit unions pay corporate income tax on a relatively lower proportion of the income received than other economic entities.

29. As mentioned before, in this constitutional justice case, the Constitutional Court investigates the compliance of the impugned Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax with Article 29 of the Constitution and the constitutional principle of a state under the rule of law.

29.1. Article 29 of the Constitution prescribes:

All persons shall be equal before the law, courts, and other state institutions and officials.

Human rights may not be restricted; no one may be granted any privileges on the grounds of gender, race, nationality, language, origin, social status, belief, convictions, or views.”

29.2. Interpreting the provisions of Article 29 of the Constitution, the Constitutional Court has held more than once that paragraph 1 of Article 29 of the Constitution consolidates the formal equality of all persons; the constitutional principle of the equality of all persons before the law requires that fundamental rights and duties be established in law equally to all; the constitutional principle of the equality of the rights of persons would be violated if certain persons or groups of such persons were treated in a different manner, even though there are no differences of such a nature and to such an extent between the said groups of persons so that their uneven treatment could be objectively justified (inter alia, the rulings of 27 June 2012 and 27 February 2012). 

29.3. The Constitutional Court has also held that a differentiated legal regulation, when it is applied to certain groups of persons that are characterised by the same features, when it strives for positive and socially meaningful goals, or when the establishment of certain limitations or conditions is linked to the particularities of regulated social relations, should not be regarded as discriminatory; in assessing whether a certain different legal regulation has been established reasonably, account must be taken of concrete legal circumstances; first of all, consideration must be given to differences in the legal situation of the persons and objects to which a certain differentiated legal regulation is applied (inter alia, the decision of 20 April 2010 and the rulings of 29 June 2010, and 6 February 2012).

29.4. It should also be noted from the aspect relevant to this constitutional justice case that, under the Constitution, inter alia, Article 46 thereof, the state, when regulating economic activity, must have regard to the constitutional requirement for the equality of the rights of economic operators, which is directly linked to the principle of the equality of the rights of all persons, as consolidated in Article 29 of the Constitution; otherwise, the legal regulation of economic activity would not be considered as one serving the general welfare of the People (inter alia, the rulings of 13 May 2005 and 15 January 2015).

29.5. The constitutional principle of the equality of the rights of persons is inseparable from the constitutional principle of a state under the rule of law, which integrates various values consolidated, protected, and defended under the Constitution (ruling (no KT28-N14/2016) of 27 October 2016 and 19 May 2017). A violation of the constitutional principle of the equality of the rights of persons is, at the same time, a violation of the constitutional imperatives of justice and harmonious society, and, thus, also a violation of the constitutional principle of a state under the rule of law (inter alia, the rulings of 6 February 2012, 14 December 2012, and 22 February 2013).

30. In this context, it should also be noted that the Constitutional Court has held that, under the Constitution, the Seimas, as the legislative authority, has a very broad discretion to shape the economic policy of the state and to regulate economic activity accordingly by means of legal acts, certainly, without violating the Constitution and laws under any circumstances, inter alia, having regard to the constitutionally consolidated principles of a state under the rule of law, responsible governance, the protection of legitimate expectations, and legal certainty (ruling of 31 May 2006). As such, the assessment of the content (inter alia, priorities), measures, and methods of the state economic policy, including the aspect of their reasonableness and expediency, even if it turns out later that there were better alternatives for choosing the economic policy, may not in itself be a reason to question the compliance of the legal regulation of an economic activity conforming to the said economic policy with higher-ranking legislation, inter alia, with the Constitution, with the exception of the situation where such a legal regulation would clearly deny the values defended and protected under the Constitution (inter alia, the rulings of 2 March 2009 and 11 June 2015).

The Constitutional Court has held that the economic activity carried out in the area of finances, inter alia, the provision of financial services, constitutes one of the specific types of economic activity (rulings of 24 May 2013 and 5 July 2013).

31. When assessing the compliance of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax with the Constitution, it should be noted that, as mentioned before, under the legal regulation consolidated therein, the duty to pay an additional corporate income tax of 5percent of credit institutions was established only for banks and credit unions, where their taxable profit exceeds EUR 2 million per year.

It has also been mentioned that, under point 9 of paragraph 2 of Article 17 and paragraph 1 (wording of 17 November 2011) and paragraph 2 of Article 27 of the Law on Corporate Income Tax, when calculating the taxable profit of banks and credit unions on which the personal income tax is calculated, the income received by those credit institutions are allowed, in addition to other fixed deductions, to deduct the special provisions for the settlement of doubtful assets of credit institutions to cover losses of a particular doubtful asset (a group of assets in question); thus, banks and credit unions pay corporate income tax on a relatively lower proportion of income received (taxable profits) than other economic entities. Thus, under such a legal regulation, the procedure for the calculation of the taxable profit of banks and credit institutions on which corporate income tax is calculated differs from the procedure for the calculation of the taxable profit of other economic entities.

31.1. In view of the above, it should be held that, under the impugned Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, the legal situation of the banks and credit unions subject to an additional corporate income tax of credit institutions is essentially different from that of other economic entities subject to corporate income tax.

Therefore, it should also be held that, under the impugned Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, there are differences of such a nature and extent between credit institutions (banks and credit unions) and other economic entities generating profits in excess of EUR 2 million per year that unequal treatment of them is objectively justified under the Constitution.

31.2. Consequently, there is no ground for stating that, having a broad discretion to shape the economic policy of the state, inter alia, in implementing its priorities and taking into account the specificity of the economic activity conducted in the area of finances, inter alia, the provision of financial services, and by means of the legal regulation consolidated in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, under which, only the entities referred to in paragraph 1 of this article – banks and credit unions – are liable to pay additional corporate income tax of 5 percent on the proportion of taxable profits in excess of EUR 2 million, the legislature violated the principle of the equality of the rights of persons, consolidated in Article 29 of the Constitution, and the constitutional principle of a state under the rule of law.

It should be emphasised that the reasonableness and expediency of the establishment of the supplementary credit institutions’ income tax consolidated in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, is not a matter of constitutional review, since there is no ground for stating that such a legal regulation would clearly deny the values consolidated, defended, and protected by the Constitution.

31.3. In view of the above, it should be concluded that Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax is not in conflict with Article 29 of the Constitution and the constitutional principle of a state under the rule of law.

32. As mentioned before, the Law on Corporate Income Tax was supplemented with Article 383 (wording of 17 December 2019) by the Law Amending the Law on Corporate Income Tax, the constitutionality of paragraph 1 of Article 13 whereof is also impugned in this constitutional justice case.

32.1. According to the petitioner, credit institutions for which a new additional corporate income tax was established, were entitled to reasonably expect a reasonable period (vacatio legis) to be set during which they would be able to prepare to pay the tax. However, having established that, under the impugned paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax comes into force on 1 January 2020, in the absence of exceptional, constitutionally justified circumstances for such an urgent entry into force, the legislature disregarded the constitutional requirement to provide for a proper time period for the entry into force of the provisions of the Law on Corporate Income Tax.

32.2. It was mentioned that the Law Amending the Law on Corporate Income Tax was adopted on 17 December 2019. This law was published in the Register of Legal Acts on 30 December 2019.

32.3. The impugned paragraph 1 of Article 13 of the Law on Amending the Law on Corporate Income Tax, “Entry into force, implementation and application of the Law’ provides: “This Law, with the exception of paragraph 4 of this article, shall enter into force on 1 January 2020.”

Consequently, under the impugned paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, on 1 January 2020, i.e. only one day after the official publication of this law, inter alia, Article 383 of the Law on Corporate Income Tax became effective, which, as mentioned before, laid down the duty for the specified credit institutions to pay an additional corporate income tax.

33. When assessing the compliance of paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, to the specified extent, with the Constitution, it should be noted that, as mentioned before, under Paragraph 1 of Article 70 of the Constitution, as interpreted in the context of the constitutional principle of a state under the rule of law, the legislature is, in certain cases, obliged to provide for a sufficient vacatio legis, i.e. a period of time from the moment of the official publication of the particular law until its entry into force (date of its application), during which the persons concerned would be able to prepare for the implementation of the requirements resulting from that law; a proper vacatio legis in the sphere of tax law is an important guarantee that persons (first of all, taxpayers) would be able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements.

It has also been mentioned that, under the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, as interpreted in conjunction with the constitutional principles of a state under the rule of law and responsible governance, the constitutional duty of the Government to draw up the draft state budget and the constitutional duty of the Seimas to consider and approve it may not in itself be interpreted as creating the preconditions for deviating from the requirement arising from the Constitution to provide for a proper vacatio legis for the entry into force of tax laws, which establish duties or limitations with respect to persons; in other words, only the need to draw up and approve the state budget is not a constitutionally justifiable, particular, and objective circumstance substantiating the immediate entry into force of tax laws; otherwise, if the legislature were permitted to deviate from the constitutional requirement to provide for a proper vacatio legis for the entry into force of tax laws in the absence of a very difficult economic and financial situation as a result of particular circumstances each time when the state budget is prepared, considered, and approved, the preconditions would be created for a permanent practice of the immediate entry into force of tax laws and, therefore, the stability of the legal regulation of taxes would not be ensured and the legitimate interests and legitimate expectations of taxpayers would not be protected and respected.

It should be noted that these provisions of the official constitutional doctrine are also applicable mutatis mutandis for the entry into force of other tax laws, which establish duties or limitations with respect to persons and which are not directly linked to the consideration and approval of the state budget.

33.1. It should be noted that the impugned paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, under which on 1 January 2020, i.e. only one day after the official publication of this law, inter alia, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax became effective, did not establish at all a vacatio legis for the entry into force of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, which, as mentioned before, laid down the duty for the specified credit institutions to pay an additional corporate income tax Thus, having established such a legal regulation, the taxpayers (banks and credit unions) of the new advance payment of additional corporate income tax by credit institutions were not able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements; therefore, their legitimate expectations and legitimate interests were violated and the stability of the legal regulation of taxes was not ensured.

Consequently, the legal regulation laid down in paragraph 1 of Article 13 of the Law Amending the Law on Corporate Income Tax, insofar as, under this legal regulation, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax became effective on 1 January 2020, i.e. only one day after the official publication of this law, disregarded the requirement, arising from the Constitution, inter alia, paragraphs 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, to provide for a proper vacatio legis for the entry into force of tax laws and not to deviate from that requirement in the absence of any extremely difficult economic and financial situation as a result of particular circumstances.

33.2. In the light of the foregoing, it should be concluded that paragraph 1 of Article 13 of the Law Amending the Law on Corporate Tax, insofar as, under this paragraph, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance.

34. The petitioner also states that, when establishing the legal regulation consolidated in Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, the legislature disregarded the prescribed procedure for adopting laws, therefore, the impugned legal regulation is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

Thus, the petitioner impugns the compliance of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax with the specified provisions of the Constitution in terms of the procedure of its adoption.

34.1. As mentioned before, the Law on Corporate Income Tax was supplemented with Article 383 (wording of 17 December 2019) by the Law Amending the Law on Corporate Income Tax, which, under paragraph 1 of Article 13 thereof, came into force on 1 January 2020.

In this ruling, it was held that paragraph 1 of Article 13 of the Law Amending the Law on Corporate Tax, insofar as, under this paragraph, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance.

This means that the procedure for the entry into force of Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax does not comply with the Constitution.

34.2. In view of the above, in the constitutional justice case at issue, the Constitutional Court will not further examine whether Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution in terms of the procedure of its adoption.

V

The assessment of the constitutionality of Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance and paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance

35. In this constitutional justice case, the Constitutional Court investigates the compliance of paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance with paragraph 4 of Article 46 and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law, as well as the compliance of Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law, insofar as under this paragraph, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020.

36. On 10 December 2019, the Seimas adopted the Law Amending the Law on the Tax on Lotteries and Games of Chance whereby it set out the provisions of Article 5 (as amended on 21 May 2015) of the Law on the Tax on Lotteries and Games of Chance in a new wording. The entry into force of the Law Amending the Law on the Tax on Lotteries and Games of Chance is regulated in the impugned Article 2 of this law.

37. As mentioned above, the petitioner impugns the compliance of paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance with, inter alia, paragraph 4 of Article 46 of the Constitution.

In the opinion of the petitioner, since the legal regulation established in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance increased the tax for the organisation of games of chance, while, under paragraph 1 of this article, the tax for the organisation of lotteries remained the same, such a legal regulation distorts fair competition and, therefore, violates paragraph 4 of Article 46 of the Constitution.

38. Article 5 “Lottery and Gaming Tax Rate and Amount” (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance provides for:

1. When operating lotteries, a tax rate of 5percent shall be imposed on the lottery and gaming tax base.

2. When operating bingo, totalisator and betting, a tax rate of 18 percent shall be imposed on the lottery and gaming tax base.

21. When operating remote games of chance, a tax rate of 13 percent shall be imposed on the lottery and gaming tax base.

3. When operating machine gaming and table games, a fixed tax amount shall be imposed on each gaming device:

(1) EUR 260 per gaming machine of category A per month of the calendar year (hereinafter referred to as the month);

(2) EUR 130 per gaming machine of category B per month;

(3) EUR 2300 per roulette, card or dice table per month.”

Thus, Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance sets out the rate of tax on lotteries and games of chance for lotteries (paragraph 1) and the respective games – bingo, totalisers and betting (paragraph 2), remote games (paragraph 21), slot machines and table games (paragraph 3).

38.1. In this context, it should be noted that Article 5 (as amended on 21 May 2015) of the Law on the Tax on Lotteries and Games of Chance established the following:

1. When operating lotteries, a tax rate of 5 percent shall be imposed on the lottery and gaming tax base.

2. When operating bingo, totalisator and betting, a tax rate of 15 percent shall be imposed on the lottery and gaming tax base.

21. When operating remote games of chance, a tax rate of 10 percent shall be imposed the lottery and gaming tax base.

3. When operating machine gaming and table games, a fixed tax amount shall be imposed on each gaming device:

(1) EUR 232 per gaming machine of category A per month of the calendar year (hereinafter referred to as the month);

(2) EUR 87 per gaming machine of category B per month;

(3) EUR 1738 per roulette, card or dice table per month.”

When comparing the legal regulation laid down in Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance with the legal regulation established in Article 5 (as amended on 21 May 2015) of the Law on the Tax on Lotteries and Games of Chance, it should be noted that the tax rate applicable to the organisation of lotteries consolidated in paragraph 1 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance has not changed. It should also be noted that, under paragraph 2 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, when operating bingo, totalisator and betting, a tax rate imposed on the lottery and gaming tax base was increased from 15 percent to 18 percent. Under paragraph 21 of this article, a tax rate imposed on the lottery and gaming tax base when operating remote games of chance was increased from 15 percent to 18 percent. Under paragraph 3 of this article, when operating machine gaming and table games, the fixed amount of the lottery and the gaming tax, taking into account the gaming device, was increased from EUR 232 to EUR 260 per month per gaming machine of category A, from EUR 87 to EUR 130 per month per gaming machine of category B, from EUR 1 738 to EUR 2 300 per month per roulette, card or dice table. Thus, the legal regulation impugned by the petitioner established new (higher) tax rates applicable for the lottery and gaming tax base and new (increased) amounts of taxes for the organisation of games of chance.

38.2. It should also be noted from the aspect relevant to this constitutional justice case that, under Article 2 of the Law on the Tax on Lotteries and Games of Chance, the tax on lotteries and games of chance are paid by the legal persons, which operate lotteries under the Republic of Lithuania’s Law on Lotteries, and legal persons, which operate games of chance under the Republic of Lithuania’s Law on Games of Chance (hereinafter referred to as the Law on Games of Chance).

In this context, it should also be noted that, as it is clear from the legal regulation consolidated in point 1 and point 2 (wording of 21 May 2015) of Article 4 of the Law on the Tax on Lotteries and Games of Chance, lottery organisers pay the tax on lotteries and games of chance from a different tax base – from the nominal value of the lottery tickets distributed, in comparison with the operators of games of chance, which pay the specified tax from the amount of bets placed by players less the amount of winnings actually paid to gamblers.

38.3. In seeking, from the aspect impugned by the petitioner, to reveal the particularities of the organisation of lotteries and games of chance, consolidated respectively in the Law on Lotteries (wording of 3 December 2019) and the Law on Games of Chance, it should be noted that:

a lottery means a game of tickets purchased for monetary prizes and/or goods and/or non-reimbursable services, randomly charged according to ticket data (paragraph 4 of Article 2 of the Law on Lotteries (wording of 3 December 2019)), and a game of chance means playing of a game or mutual betting in accordance with established regulations, where the participants, seeking to win money, voluntarily risk losing their stakes and where winnings or losses are determined by chance, the outcome of an event or a sports competition (paragraph 1 of Article 2 of the Law on Games of Chance);

the lottery organiser shall allocate 8 percent of the nominal value of the lottery tickets distributed during the calendar quarter for sponsorship purposes (paragraph 1 of Article 19 of the Law on Lotteries), meanwhile, such a duty is not established for the organisers of games of chance;

joint-stock companies and closed joint-stock companies, operating in accordance with the procedure laid down in the Republic of Lithuania’s Law on Joint-Stock Companies, have the right to organise games of chance (paragraph 20 (wording of 20 December 2018) of Article 2 of the Law on Games of Chance), while lotteries may be organised by any form of legal person established in Lithuania or in another state (paragraph 1 of Article 2 of the Law on Lotteries (wording of 3 December 2019));

minors shall be prohibited from participating in games of chance, organising games of chance in designated places, pay for them with payment cards, advertising of games of chance, it shall be obligatory to establish the identity of persons participating in games of chance, and the possibility shall be provided for a person to submit an application for exclusion from games of chance (Article 10 (as amended on 28 April 2020) of the on Games of Chance), and no such restrictions are provided for lotteries’ organisers (Article 28 (wording of 3 December 2019) of the Law on Lotteries).

38.4. To sum up the legal regulation laid down in the provisions of the Law on the Tax on Lotteries and Games of Chance, the Law on Lotteries (wording of 3 December 2019), and the Law on Games of Chance, from the aspect relevant to this constitutional justice case, it should be noted that, although persons participating in lotteries and games of chance risk a certain amount of money as a result of accidental winnings, the conditions for organising and taxing those activities are fundamentally different. Thus, under the legal regulation consolidated in the Law on Lotteries (wording of 3 December 2019) and the Law on Games of Chance, the organisation of lotteries and the organisation of games of chance are separate activities; under the provisions of Article 4 (as amended on 21 May 2015) of the Law on the Tax on Lotteries and Games of Chance, a tax rate imposed on these activities is calculated from a different tax base (when organising lotteries – from the nominal value of the lottery tickets distributed, and when organising games of chance – from the amount of bets placed by players less the amount of winnings).

39. In deciding whether paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance are in conflict with paragraph 4 of Article 46 of the Constitution, it should be noted that, in interpreting the provisions of paragraph 4 of Article 46 of the Constitution, the Constitutional Court has held that:

freedom of individual economic activity and economic initiative, among other things, imply freedom of fair competition; the protection of fair competition is the main method to ensure harmony between the interests of a person and society while regulating economic activity, as well as to create the self-regulation of economy as a system, which promotes the optimal distribution of economic resources and their efficient use, economic growth, and the improvement of the welfare of consumers (inter alia, the rulings of 2 March 2009 and 5 March 2015);

the constitutional guarantee of the protection of fair competition obliges the institutions of state power and municipal institutions to ensure freedom of fair competition by legal measures (inter alia, the rulings of 17 March 2003, 26 January 2004, and 2 March 2009); the legislature must establish, by means of laws, such a legal regulation that freedom of fair competition would be ensured, and measures for the protection of freedom of fair competition would be envisaged (rulings of 17 March 2003 and 26 January 2004);

the constitutional guarantee of the protection of fair competition means, inter alia, the prohibition precluding state and municipal institutions that regulate economic activity from adopting decisions that distort or can distort fair competition (ruling of 26 January 2004). It is not allowed to grant by law exceptional rights to an economic operator to operate in a certain sector of economy (inter alia, the ruling of 29 September 2010);

the assessment of the different levels of all tax rates for individual economic sectors as restrictive of competition in general would mean denying the possibility of regulating economic activities in a way that, inter alia, the variety and changes in the economy and social life would be taken into account; the tax rates would limit competition if they were not the identical for the same category (economic or business) of persons, i.e. certain tax rates for some entities and different for the others (ruling of 15 March 1996).

It should also be noted from the aspect relevant to this constitutional justice case that the Constitutional Court has held that the Constitution, inter alia, Articles 46 and 53 thereof, gives rise to the requirement that, when regulating the relations of economic activity in the area of organising games of chance and taking account of the fact that organising games of chance may result in negative consequences for the health of people, public order, and the security of members of society, as well as for other values that are protected and defended by law, the legislature must establish the grounds for organising games of chance as an economic activity, and that the legislature may and, in certain situations, also must establish limitations on the activity of organising games of chance (ruling of 21 June 2011).

As mentioned before, under the Constitution, the Seimas, as the legislative authority, has a very broad discretion to shape the economic policy of the state and to regulate economic activity accordingly by means of legal acts, certainly, without violating the Constitution and laws under any circumstances, inter alia, having regard to the constitutionally consolidated principles of a state under the rule of law, responsible governance, the protection of legitimate expectations, and legal certainty.

It has also been mentioned that as such, the assessment of the content (inter alia, priorities), measures, and methods of the state economic policy, including the aspect of their reasonableness and expediency, even if it turns out later that there were better alternatives for choosing the economic policy, may not be a reason to question the compliance of the legal regulation of an economic activity conforming to the said economic policy with higher-ranking legislation, inter alia, with the Constitution, with the exception of the situation where such a legal regulation would clearly deny the values defended and protected under the Constitution.

39.1. When assessing the legal regulation established in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, it should be noted that, as it is clear from the legal regulation governing lotteries and games of chance consolidated in the Law on the Tax on Lotteries and Games of Chance, as well as the Law on Lotteries (wording of 3 December 2019), these are separate licensed economic activities which are subject to different taxation procedures (inter alia, the tax on lotteries and games of chance, which is calculated for the lotteries and games of chance, among others, from a different tax base, and there is a specific obligation for lottery organisers to allocate a certain percentage of their income for support).

In view of the above, it should be held that, under the impugned legal regulation laid down in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, which introduced new (higher) tax rates applicable for the lottery and gaming tax base and new (higher) fixed amount of lottery and gaming fee, did not grant any exceptional rights for lottery organisers engaged in economic activity.

39.2. It should also be held that, when setting the different tax rates applicable to the tax base of lotteries and games of chance and the levels of the tax of lotteries and games of chance for lotteries and games of chance, account is taken of the priorities of the state economic and social policies, as well as on objective differences between the activities of lotteries and those of games of chance and possible negative consequences of the activities of organising games of chance. Consequently, the legal regulation laid down in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance does not create preconditions for limiting competition in separate economic activities of lotteries and games of chance, it has implemented the requirement stemming from the Constitution, inter alia, Articles 46 and 53 thereof, to establish limitations on the activity of organising games of chance taking into account the fact that this activity may result in negative consequences for the health of people, public order, and the security of members of society, as well as for other values that are protected and defended by law.

Consequently, there is no ground to state that the legislature, having a broad discretion to shape the economic policy of the state, inter alia, in implementing its priorities and taking into account the specificity of the economic activity of organising games of chance, by means of the legal regulation laid down in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, the legislature violated freedom of fair competition, which is consolidated in paragraph 4 of Article 46 of the Constitution.

It should be noted that the reasonableness and expediency of the establishment of new (higher) tax rates applicable for the lottery and gaming tax base and new (increased) amounts of taxes for the organisation of games of chance, which are consolidated in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, is not a matter of constitutional review, since there is no ground for stating that such a legal regulation would clearly deny the values consolidated, defended, and protected by the Constitution.

39.3. Taking into account the foregoing arguments, it should be held that paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance are not in conflict with paragraph 4 of Article 46 of the Constitution in terms of their content.

40. As mentioned above, paragraphs 2, 21 and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance were set out in a new wording by the Law Amending the Law on the Tax on Lotteries and Games of Chance, the compliance of Article 2 whereof is also impugned in this constitutional justice case.

40.1. According to the petitioner, the persons for whom new (higher) tax rates applicable for the lottery and gaming tax base and higher fixed amount of lottery and gaming fee for the respective gaming device were introduced by means of the impugned legal regulation were entitled to reasonably expect a reasonable period (vacatio legis) to be set during which they would be able to prepare to pay higher taxes. However, having established that the Law on the Tax on Lotteries and Games of Chance comes into force on 1 January 2020, although there were no exceptional, constitutionally justified circumstances for such an urgent entry into force, the legislature disregarded the requirement stemming from the constitutional principle of a state under the rule of law to provide for an appropriate period of time for the entry into force of the said laws (parts thereof).

40.2. It has been mentioned that the Law Amending the Law on the Tax on Lotteries and Games of Chance was adopted on 10 December 2019. This law was published in the Register of Legal Acts on 20 December 2019.

40.3. The impugned Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance prescribed the following: “This law shall come into force on 1 January 2020.”

Consequently, under the impugned Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, on 1 January 2020, i.e. less than one month after the official publication of this law, the provisions of paragraphs 2, 21, and 3 of Article 53 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force, which, as mentioned before, introduced new (higher) tax rates applicable for the lottery and gaming tax base and higher fixed amount of lottery and gaming fee for the respective gaming device.

40.4. It should be noted that it is clear from the travaux préparatoires of the Law on the State Budget for 2020 that the Law Amending the Law on the Tax on Lotteries and Games of Chance was submitted as the law linked to the Law on the State Budget for 2020 (the explanatory note to the draft Republic of Lithuania’s Law (No XIIIP-4014(2)) on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020, as improved by the proposals of the Committee on Budget and Finance of the Seimas of the Republic of Lithuania, other committees of the Seimas, commissions of the Seimas, state institutions and enterprises, as well as associations).

41. In assessing the compliance of Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, to the specified extent, with the Constitution, it should be noted that, as mentioned before:

under paragraph 1 of Article 70 of the Constitution, as interpreted in the context of the constitutional principle of a state under the rule of law, the legislature is, in certain cases, obliged to provide for a sufficient vacatio legis, i.e. a period of time from the moment of the official publication of the particular law until its entry into force (date of its application), during which the persons concerned would be able to prepare for the implementation of the requirements resulting from the law; the proper vacatio legis in the sphere of tax law is an important guarantee that persons (first of all, taxpayers) would be able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements;

under the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, the constitutional duty of the state to draw up a draft state budget and the constitutional duty of the Seimas to consider and approve it may not, in itself, be interpreted as creating the preconditions for deviating from the requirement, arising from the Constitution, to provide for a proper vacatio legis for the entry into force of tax laws, which establish duties or limitations with respect to persons; in other words, only the need to draw up and approve the state budget is not a constitutionally justifiable, particular, and objective circumstance substantiating the immediate entry into force of tax laws; otherwise, if the legislature were permitted to deviate from the constitutional requirement to provide for a proper vacatio legis for the entry into force of tax laws in the absence of a very difficult economic and financial situation as a result of particular circumstances each time when the state budget is prepared, considered, and approved, the preconditions would be created for a permanent practice of the immediate entry into force of tax laws and, therefore, the stability of the legal regulation of taxes would not be ensured and the legitimate interests and legitimate expectations of taxpayers would not be protected and respected.

41.1. It should be noted that the impugned Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, under which, inter alia, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, i.e. less than one month after the official publication of the relevant law, did not establish an appropriate vacatio legis for the entry into force of the legal regulation consolidated in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, which introduced new (higher) tax rates applicable for the lottery and gaming tax base and higher fixed amount of lottery and gaming fee for the respective gaming device. Thus, having established such a legal regulation, the payers of the tax on lotteries and games of chance, which operate games of chance, were not able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements; therefore, their legitimate expectations and legitimate interests were violated and the stability of the legal regulation of taxes was not ensured.

Consequently, the impugned legal regulation laid down in Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, insofar as, under this legal regulation, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, i.e. less than one month after the official publication of the relevant law, disregarded the requirement, arising from the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, to provide for a proper vacatio legis for the entry into force of tax laws and not to deviate from that requirement in the absence of any extremely difficult economic and financial situation as a result of particular circumstances.

41.2. In the light of the foregoing, it should be concluded that Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, insofar as, under this article, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance.

42. The petitioner also states that, when establishing the legal regulation consolidated in paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, the legislature disregarded the prescribed procedure for adopting laws, therefore, the impugned legal regulation is in conflict with paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law.

Thus, the petitioner impugns the compliance of paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance with the specified provisions of the Constitution in terms of the procedure of its adoption.

42.1. As mentioned above, the legal regulation consolidated in paragraphs 2, 21 and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance was established by the Law Amending the Law on the Tax on Lotteries and Games of Chance, which, in accordance with Article 2 thereof, came into force on 1 January 2020.

In this ruling, it was held that Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, insofar as, under this article, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance.

This means that the procedure for the entry into force of paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance does not comply with the Constitution.

42.2. In view of the above, in the constitutional justice case at issue, the Constitutional Court will not further examine whether paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance are in conflict with paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law in terms of the procedure of its adoption.

VI

The assessment of the compliance of the provisions of the Law Amending the Law on Excise Duty, the Law on Amending the Law Amending the Law on Excise Duty, and the Law on Excise Duty, with the Constitution

43. In this constitutional justice case, the Constitutional Court investigates the following:

the compliance of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, as well as paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty with paragraph 2 of Article 5, paragraph 4 of Article 46, and paragraph 1 of Article 69 of the Constitution and the constitutional principle of a state under the rule of law;

the compliance of paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020 and paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, under which paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty came into force on 1 March 2020, with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law;

the compliance of paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

44. It should be noted that, on 3 December 2019, the Seimas adopted the Law Amending the Law on Excise Duty, Article 3 whereof amended, inter alia, the provisions of paragraph 1 (wording of 11 December 2018) of Article 26 of the Law on Excise Duty (wording of 1 April 2010); the impugned paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty regulates the procedure for the entry into force of these provisions. Articles 4 and 5 of the Law Amending the Law on Excise Duty amended respectively the provisions of point 1 of Article 35 (wording of 23 September 2014) and Article 37 (as amended on 5 December 2017) of the Law on Excise Duty; the impugned paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty regulates the procedure for the entry into force of the said amended provisions of the Law on Excise Duty.

It should also be noted that, on 5 December 2019, the Seimas adopted the Law on Amending the Law Amending the Law on Excise Duty, which amended the provisions of the Republic of Lithuania’s Law Amending Articles 1, 2, 3, 30, and 31 and Chapters II and III of the Law (No IX-569) on Excise Duty (hereinafter also referred to as the Law Amending the Law on Excise Duty of 28 June 2018) regulating the amendment and entry into force of paragraph 1 of Article 65 of the Law on Excise Duty. The impugned paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty established the procedure for the entry into force of the amended provisions of the Law Amending the Law on Excise Duty of 28 June 2018.

45. As mentioned before, the petitioners impugn the compliance of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, as well as paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty with, inter alia, paragraph 2 of Article 5 and paragraph 4 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

46. The petitioner substantiates its doubts concerning the compliance of the impugned legal regulation with the Constitution on the fact that by having increased, by means of the provisions of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, and paragraphs 1 and 3 of Article 37 (wording of 3 December 2019) of the Law on Excise Duty, the rates of excise duty only for certain products (ethyl alcohol, unleaded petrol, gas oils, incandescent tobacco products) and a competitive advantage is unreasonably granted to economic entities producing, selling or using other types of products in their activities. Since the impugned provisions of the Law on Excise Duty unduly worsened the situation of market participants producing ethyl alcohol, as well as unleaded petrol (especially used by operators of agricultural activities) or using them in their activities, and not, respectively, other alcoholic products or other fuels, inter alia, by having increased their operating costs, the conditions for unfair competition were created, and, therefore, paragraph 4 of Article 46 of the Constitution was violated.

Furthermore, according to the petitioner, in the absence of a particularly difficult economic situation in the state, due to such a radical increase in certain excise duty rates, business representatives start to mistrust the entire legal business environment and to question the state’s compliance with its obligations, thus violating the constitutional principles of the rule of law, the protection of legitimate expectations, legal certainty, legal security, proportionality, and justice.

47. The impugned paragraph 1 (wording of 3 December 2019) of Article 26 “Rates of excise duty on ethyl alcohol” of the Law on Excise Duty provides the following: “Excise duty on ethyl alcohol shall be levied at the rate of EUR 2 025 per 1 hectolitre of absolute ethyl alcohol.”

47.1. In the context of this constitutional justice case, it should be noted that paragraph 1 (wording of 11 December 2018) of Article 26 of the Law on Excise Duty laid down the following: “Excise duty on ethyl alcohol shall be levied at the rate of EUR 1 832 per 1 hectolitre of absolute ethyl alcohol.”

The comparison of the legal regulation laid down in paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty with the legal regulation laid down in paragraph 1 (wording of 11 December 2018) of Article 26 of the Law on Excise Duty makes it clear that, under paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty a new, i.e. higher (increased from EUR 1 832 to EUR 2 025), excise duty rate is applied on ethyl alcohol.

47.2. It should be noted that it is clear from the travaux préparatoires of the Law Amending the Law on Excise Duty that the increase in the excise duty rate on ethyl alcohol due to the increasing difference of taxation compared to other alcoholic beverages was intended to contribute to reducing the availability of this product, which would be in line with the recommendations to reduce the attractiveness and availability of alcoholic beverages by increasing the excise duty rate (the explanatory note to the draft Law Amending Articles 1, 2, 3, 30, and 31 of the Law (No IX-569) on Excise Duty and draft Law Amending Articles 8 and 9 of the Law (No XIII-1327) Amending Chapters II and III (hereinafter also referred to as the Explanatory note).

47.3. It should be mentioned from the aspect relevant to this constitutional justice case that the provisions of the Law Amending the Law on Excise Duty regulating the rates of excise duty on other alcoholic products (alcoholic beverages), such as, for instance, beer (Article 23 (as amended on 8 December 2015) of the Law on Excise Duty), wine and other fermented beverages (Article 24 (wording of 8 December 2015) of the Law on Excise Duty), and intermediate alcoholic products (Article 25 (wording of 8 December 2015) of the Law on Excise Duty), were not amended, therefore, the rates of excise duty on the said alcoholic products did not change.

48. The impugned point 1 (wording of 3 December 2019) of Article 35 “Rates of Excise Duty on Motor Petrol” of the Law on Excise Duty prescribes that following:

Excise duty shall be levied on motor petrol at the following rate:

(1) on unleaded petrol – at the rate of EUR 466 per 1 000 litres of the product;”

48.1. In this context, it should be mentioned that point 1 of Article 35 (wording of 23 September 2014) of the Law on Excise Duty prescribed the following:

Excise duty shall be levied on motor petrol at the following rate:

(1) on unleaded petrol – at the rate of EUR 434.43 per 1 000 litres of the product;”

The comparison of the legal regulation laid down in point 1 (wording of 3 December 2019) of Article 35 of the Law on Excise Duty with the legal regulation laid down in point 1 of Article 35 (wording of 23 September 2014) of the Law on Excise Duty makes it clear that, under point 1 (wording of 3 December 2019) of Article 35 of the Law on Excise Duty a new, i.e. higher (increased from EUR 434.43 to EUR 466 per 1 000 litres of the product), excise duty rate is applied on unleaded petrol.

48.2. It should be mentioned from the aspect relevant to this constitutional justice case that point 2 of Article 35 (wording of 23 September 2014) of the Law on Excise Duty was not amended by the Law on Amending the Law on Excise Duty; therefore, the excise duty rate on leaded petrol established in the said law did not change.

49. The impugned Paragraphs 1 and 3 of Article 37 “Rates of excise duty on gas oils” (wording of 3 December 2019) of the Law on Excise Duty prescribe:

1. The rate of excise duty on gas oils shall be EUR 372 per 1 000 litres of the product, unless otherwise provided for in this Article.

[...]

3. Gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government. For the purpose of this paragraph, the quantity of gas oils shall be declared at 15 °C. The Government or an institution authorised by it shall establish the procedure for applying the tax relief provided for in this paragraph.”

49.1. In this context, it should be mentioned that point 1 of Article 37 (as amended on December 2017) of the Law on Excise Duty, inter alia, prescribed the following:

1. The rate of excise duty on gas oils shall be EUR 347 per 1 000 litres of the product, unless otherwise provided for in this Article.

[...]

3. Gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 56 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government. […]”

The comparison of the legal regulation laid down in Article 37 (wording of 3 December 2019) of the Law on Excise Duty and the legal regulation laid down in Article 37 (as amended on 5 December 2017) of the Law on Excise Duty makes it clear that, under paragraph 1 of Article 37 of the Law on Excise Duty, a new, i.e. higher (increased from EUR 347 to EUR 372 per 1 000 litres of the product), excise duty rate is applied on gas oils, and, under paragraph 3 of this article, a new, i.e. higher (increased from EUR 56 to EUR 60 per 1 000 litres of the product) excise duty rate is applied on gas oils intended for use in the production of agricultural products by operators of agricultural activities. Thus, this legal regulation established new (higher) excise duty rates applied, respectively, on gas oils in general and gas oils intended for use in the production of agricultural products by operators of agricultural activities.

49.2. It should be noted that it is clear from the travaux préparatoires of the Law Amending the Law on Excise Duty that the increase in the excise duty rate on unleaded petrol, gas oils, and gas oils used for agricultural activities was aimed at promoting the use of cleaner fuels with a lower impact on climate change, thereby reducing emissions and contributing to global efforts to combat climate change (the Explanatory note).

50. The impugned paragraph 1 (wording of 5 December 2019) of Article 65 “Rates of excise duty on incandescent tobacco products and electronic cigarettes” of the Law on Excise Duty provides the following: “The excise duty rate of EUR 113.2 per one kilogram of tobacco applies to incandescent tobacco products.”

50.1. Paragraph 1 of Article 65 of the Law on Excise Duty prescribes: “The excise duty rate of EUR 68.6 per one kilogram of tobacco applies to incandescent tobacco products.”

The comparison of the legal regulation laid down in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty with the legal regulation laid down in paragraph 1 of Article 65 of the Law on Excise Duty makes it clear that, under paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty a new, i.e. higher (increased from EUR 68.6 to EUR 113.2), excise duty rate is applied on incandescent tobacco products.

50.2. In this context, it should also be noted that the Law Amending the Law on Excise Duty of 28 June 2018, which was amended by the impugned Law on Amending the Law Amending the Law on Excise Duty, established different wordings of the provisions of paragraph 1 of Article 65 of the Law on Excise Duty and the procedure for their entry into force:

paragraph 1 of Article 65 of the Law on Excise Duty, in which it was specified that “The excise duty rate of EUR 78.5 per one kilogram of tobacco applies to incandescent tobacco products” had to enter into force on 1 March 2020;

paragraph 1 of Article 65 of the Law on Excise Duty, in which it was specified that “The excise duty rate of EUR 90 per one kilogram of tobacco applies to incandescent tobacco products” had to enter into force on 1 March 2021.

It should be noted from the aspect relevant to this constitutional justice case that, before the entry into force of the impugned paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, provision was made for a double increase in the rate of excise duty applicable to incandescent tobacco, and the highest provided excise duty rate would have been lower than that established in the impugned paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty and it would be applicable only one year and half after the official publication of the relevant law, i.e. from 1 March 2021. It should be noted that the provisions of paragraph 1 of Article 65 of the Law on Excise Duty, which had not yet entered into force in such a wording, were amended by the Law on Amending the Law Amending the Law on Excise Duty, whereby paragraph 1 of Article 65 of the Law on Excise Duty was set out in the impugned wording of 5 March 2019.

50.3. It should be noted that it is clear from the travaux préparatoires of the Law Amending the Law on Excise Duty that the increase in the excise duty rate on incandescent tobacco products was intended to reduce the substitution effect of cigarettes, as the market share of sold in incandescent tobacco increased significantly (from 0.4 percent in 2017 to 6.5 percent in 2019) in the total tobacco product market, while cigarette consumption decreased accordingly during that period, and, thus, also to contribute to the achievement of the health improving objectives (the Explanatory note).

50.4. It should be mentioned from the aspect relevant to this constitutional justice case that the provisions of the Law on Excise Duty regulating excise duty rates for the liquid for electronic cigarettes (paragraph 2 of Article 65), as well as excise duty rates applied on cigarettes (Article 30 (as amended on 28 June 2018)) and other manufactured tobacco – cigars, cigarillos, and smoking tobacco (Article 31 (wording of 28 June 2018)) were not amended.

51. As mentioned before, in this constitutional justice case, the Constitutional Court examines the compliance of the legal regulation consolidated in the Law on Excise Duty with paragraph 2 of Article 5 and paragraph 4 of Article 46 of the Constitution and the constitutional principle of a state under the rule of law.

51.1. It was mentioned that, in interpreting the provisions of paragraph 4 of Article 46 of the Constitution, the Constitutional Court stated that:

freedom of individual economic activity and economic initiative, among other things, imply freedom of fair competition; the protection of fair competition is the main method to ensure harmony between the interests of a person and society while regulating economic activity, as well as to create the self-regulation of economy as a system, which promotes the optimal distribution of economic resources and their efficient use, economic growth, and the improvement of the welfare of consumers;

the legislature must establish, by means of laws, such a legal regulation that freedom of fair competition would be ensured; the constitutional guarantee of the protection of fair competition means, inter alia, the prohibition precluding state and municipal institutions that regulate economic activity from adopting decisions that distort or can distort fair competition;

the assessment of the different levels of all tax rates for individual economic sectors as restrictive of competition in general would mean denying the possibility of regulating economic activities in a way that, inter alia, the variety and changes in the economy and social life would be taken into account; the tax rates would limit competition if they were not identical for the same category (economic or business) of persons, i.e. certain tax rates for some entities and different for the others.

51.2. It has also been mentioned that, under the Constitution, the Seimas, as the legislative authority, has a very broad discretion to shape the economic policy of the state and to regulate economic activity accordingly by means of legal acts, certainly, without violating the Constitution and laws under any circumstances, inter alia, having regard to the principles of a state under the rule of law, responsible governance, the protection of legitimate expectations, and legal certainty, which are consolidated in the Constitution.

It has also been mentioned that as such, the assessment of the content (inter alia, priorities), measures, and methods of the state economic policy, including the aspect of their reasonableness and expediency, even if it turns out later that there were better alternatives for choosing the economic policy, may not be a reason to question the compliance of the legal regulation of an economic activity conforming to the said economic policy with higher-ranking legislation, inter alia, with the Constitution, with the exception of the situation where such a legal regulation would clearly deny the values defended and protected under the Constitution.

It should also be noted that, as the Constitutional Court has held, due to a specific character, variety, and dynamism of economic activity, the regulation of concrete relations in this area may not be the same all the time; the legal regulation of economic activity may also be changed in order to ensure the public interest (inter alia, the rulings of 31 May 2006, 2 March 2009, and 21 June 2011); in changing the legal regulation of the relations of economic activity, the state may also change the conditions of economic activity; however, in doing so, the state must pay regard to the norms and principles of the Constitution, as well as the principle of the protection of legitimate expectations (ruling of 13 May 2005).

51.3. It has been mentioned that the legislature must pay regard, inter alia, to the constitutional principle of a state under the rule of law in all cases, inter alia, in the imposition of taxes; the persons who, under the Constitution, must pay taxes established by law have the right to reasonably expect that, in the course of establishing or changing taxes, regard should be paid to the constitutional principle of a state under the rule of law, inter alia, the principles of legal certainty, legal security and the protection of legitimate expectations, which implies the duty of the state to ensure the stability of the legal regulation by which taxes are established, as well as to protect and respect the legitimate interests and legitimate expectations of taxpayers. Under paragraph 2 of Article 5 of the Constitution, the Seimas, as the legislative institution that passes laws and other legal acts, is independent inasmuch as its powers and its wide discretion are not limited by the Constitution, inter alia, by the constitutional principles of a state under the rule of law, the separation of powers, responsible governance, the protection of legitimate expectations, legal clarity, as well as by other principles.

52. It has been mentioned that, under paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty a higher (increased from EUR 1 832 to EUR 2 025) excise duty rate is applied on ethyl alcohol.

53. When assessing the compliance of the legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty, under which, as mentioned before, the excise duty rate applied on ethyl alcohol was increased from EUR 1 832 to EUR 2 025 per 1 hectolitre of absolute ethyl alcohol (i.e. a higher excise duty rate applied on ethyl alcohol was established) with the Constitution, in terms of its content, it should be noted that the excise duty rate on ethyl alcohol, as established by this legal regulation, applies equally to all economic entities using ethyl alcohol in their activities, i.e. economic entities producing, selling or using products of the same type in their activities.

It has also been mentioned that it is clear from the Explanatory note that the increase in the excise duty rate on ethyl alcohol due to the increasing difference of taxation compared to other alcoholic beverages was intended to contribute to reducing the attractiveness and availability of this product.

53.1. In this context, it should be noted that the Constitutional Court has stated that the special state regulation regime, applied for alcoholic products, is a grounded and constitutionally justified matter, inter alia, due to universally known negative consequences that may be caused by alcohol consumption to human health, public order, and the security of members of society, as well as to other values that are protected and defended by law (ruling of 21 January 2008); the state and its institutions, having the discretion to establish a special legal regulation of alcohol production and the alcohol market, must not do so by choosing such means that would be inadequate to the objectives sought, where by the said means they would introduce the monopoly of the production of these products and their market and would groundlessly restrict freedom of economic activity and fair competition (ruling of 26 January 2004).

53.2. It should be held that by establishing a higher rate of excise duty on ethyl alcohol than on other alcoholic products thus seeking to limit the availability of ethyl alcohol, the legislature takes account of the priorities of the state economic and social policies, as well as the harm caused by alcohol consumption to human health and other negative consequences for the public order, and the security of members of society, as well as for other values that are protected and defended by law. Thus, the legal regulation consolidated paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty is an element of the special state regulation regime, applied for alcoholic products, which does create preconditions for limiting freedom of fair competition and which does not in itself deny the imperatives of the protection of legitimate expectations, legal certainty, and legal security.

53.3. Consequently , there is no ground to state that the legislature, having a broad discretion to shape the economic policy of the state, inter alia, in implementing its priorities and taking into account the constitutional imperative of health protection and the specificity of the economic activity of production and disposal of ethyl alcohol, have violated, by means of the legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty, freedom of fair competition, which is consolidated in paragraph 4 of Article 46 of the Constitution, the constitutional principle of a state under the rule of law, thus, also paragraph 2 of Article 5 of the Constitution.

It should be emphasised that the reasonableness and expediency of the establishment of the new higher rate of excise duty applicable for ethyl alcohol, which is consolidated in paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty, is a matter of constitutional review, since there is no ground for stating that such a legal regulation would clearly deny the values consolidated, defended, and protected by the Constitution.

54. It has been mentioned that, under the impugned point 1 (wording of 3 December 2019) of Article 35 of the Law on Excise Duty, a new, i.e. higher (increased from EUR 434.43 to EUR 466 per 1 000 litres of the product), excise duty rate is applied on unleaded petrol; under paragraph 1 of Article 37 of the Law on Excise Duty, a new, i.e. higher (increased from EUR 347 to EUR 372 per 1 000 litres of the product), excise duty rate is applied on gas oils; under paragraph 3 of this article, a new, i.e. higher (increased from EUR 56 to EUR 60 per 1 000 litres of the product), excise duty rate is applied on gas oils intended for use in the production of agricultural products by operators of agricultural activities; it is also mentioned that this legal regulation established new (higher) excise duty rates applied, respectively, on gas oils in general and gas oils intended for use in the production of agricultural products by operators of agricultural activities.

55. When assessing the constitutionality of point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty to the specified extent in terms of its content, it should be noted that the excise duty rate, established by means of this legal regulation, for unleaded petrol and certain oils apply equally to all economic entities using the said fuels in their activities, i.e. economic entities producing, selling or using products of the same type in their activities.

It has also been mentioned that the Explanatory note makes it clear that the increase in the excise duty rate on unleaded petrol, gas oils, and gas oils used for agricultural activities was aimed at promoting the use of cleaner fuels with a lower impact on climate change, thereby reducing emissions and contributing to global efforts to combat climate change.

55.1. In this context, it should be noted that the Constitutional Court has stated that one of the objectives of the activities carried out by the state is to ensure the rights of people to a healthy and clean environment (inter alia, the rulings of 31 January 2011 and 9 May 2014); the Constitution , inter alia, paragraph 3 of Article 53 and paragraph 2 of Article 54 thereof, enshrines the imperative of the environmental protection against harmful influences (inter alia, the rulings of 29 October 2003, 14 March 2006, and 16 December 2015).

55.2. It should be held that, in establishing a higher rate of excise duty on unleaded petrol and certain gas oils than on other fuels, as well as in seeking to promote the use of cleaner fuels with a lower impact on climate change, thereby reducing emissions, the legislature takes account of the priorities of the state economic and social policies, as well as the imperative of the environmental protection against harmful influences, which is consolidated in the Constitution, inter alia, paragraph 3 of Article 53 and paragraph 2 of Article 54 thereof. Thus, the legal regulation consolidated in point 1 (wording of 3 December 2019) of Article 35 and paragraphs 1 and 3 of Article 37 (wording of 3 December 2019) of the Law on Excise Duty does not create preconditions for limiting freedom of fair competition and which does not in itself deny the imperatives of the protection of legitimate expectations, legal certainty, and legal security.

55.3. Consequently, there is no ground for stating that the legislature, having a broad discretion to shape the economic policy of the state, inter alia, in implementing its priorities and taking into account the constitutional imperative of the environmental protection against harmful influences, by means of the legal regulation consolidated in point 1 (wording of 3 December 2019) of Article 35, and paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, the legislature violated freedom of fair competition, which is consolidated in paragraph 4 of Article 46 of the Constitution, the constitutional principle of a state under the rule of law, thus, also paragraph 2 of Article 5 of the Constitution.

It should be emphasised that the reasonableness and expediency of the establishment of the new (higher) rate of excise duty applicable for, respectively, gas oils in general and gas oils intended for use in the production of agricultural products by operators of agricultural activities, is not a matter of constitutional review, since there is no ground for stating that such a legal regulation would clearly deny the values consolidated, defended, and protected by the Constitution.

56. It has been mentioned that, under paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty a higher (increased from EUR 68.6 to EUR 113.2) excise duty rate is applied on incandescent tobacco products.

According to the petitioners, by providing for in the Law Amending the Law on Excise Duty of 28 June 2018 that excise duty rates applicable to all categories of tobacco products by 2021 shall be gradually increased within a few years, the legislature gave rise to the legitimate expectation that the said excise duty rates would be gradually increased over several years. However, by having adopted the impugned paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, the legislature increased the excise duty rate applicable to only one category – for incandescent tobacco; in addition, the planned gradual increase of excise duty rates was disregarded. Thus, according to the petitioners, such a legal regulation violated the imperatives of the protection of legitimate expectations, legal certainty, and legal security stemming from the constitutional principle of a state under the rule of law. Furthermore, according to the petitioners, by having increased the rate of excise duty applicable to only one category – for incandescent tobacco, a competitive advantage is unreasonably granted to economic entities producing, selling or using other types of products in their activities. Thus, in the opinion of the petitioners, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty is in conflict with paragraph 2 of Article 5 and paragraph 4 of Article 46 of the Constitution and with the constitutional principle of a state under the rule of law.

57. When assessing the compliance of the legal regulation consolidated in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, under which, the excise duty rate applied on incandescent tobacco products was increased (from EUR 68.6 to EUR 113.2 per kilogram of tobacco) with the Constitution, in terms of its content, it should be noted that the excise duty rate, established by means of this legal regulation, for incandescent tobacco apply equally to all economic entities using incandescent tobacco in their activities, i.e. economic entities producing, selling or using products of the same type.

It should be noted that it is clear from the Explanatory note that the increase in the excise duty rate on incandescent tobacco products was intended to reduce the substitution effect of cigarettes, as the market share of sold in incandescent tobacco increased significantly in the total tobacco product market, while the consumption of cigarettes decreased accordingly during that period, and, thus, also to contribute to the achievement of the health improving objectives.

57.1. In this context, it should be noted that the Constitutional Court has mentioned that tobacco products are categorised as special products and a special state legal regulation is applied to trade in such products, and to other types of activity related to them and their consumption (ruling of 17 September 2008); tobacco use is harmful to health and can give rise to negative social effects; due to this, tobacco products should be categorised as special products whose production, circulation and consumption may and must be controlled by the state, which, under the Constitution, is, inter alia, under obligation to look after the health of the people (paragraph 1 of Article 53 of the Constitution); the legislature, which has the right, under the Constitution, to establish the means and a procedure for control over tobacco as a special product, may establish special legal regulation, inter alia, certain prohibitions, limitations, etc., which are not characteristic of the legal regulation of relations of production, circulation and consumption of other products (rulings of 3 November 2005 and 17 September 2008).

57.2. It should be held that, by imposing a higher rate of excise duty on incandescent tobacco than on other categories of tobacco, the legislature seeks to take into account the priorities of the state economic and social policies, as well as the harm caused by alcohol consumption to human health and other negative consequences. Thus, the legal regulation consolidated in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty is a special element of the legal regulation of the state of incandescent tobacco as a special product, implementing the obligation, arising from paragraph 1 of Article 53 of the Constitution, for the state to take care of the health of people; it does not create the preconditions for limiting freedom of fair competition and it does not in itself deny the imperatives of the protection of legitimate expectations, legal certainty, and legal security.

57.3. Consequently, there is no basis for stating that the legislature, having a broad discretion to shape the economic policy of the state, inter alia, in implementing its priorities and taking into account the constitutional imperative of health protection and the specificity of the economic activity of production and disposal of tobacco, has violated, by means of the legal regulation consolidated in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, freedom of fair competition, which is consolidated in paragraph 4 of Article 46 of the Constitution, the constitutional principle of a state under the rule of law, thus, also paragraph 2 of Article 5 of the Constitution.

It should be emphasised that the reasonableness and expediency of the establishment of the higher rate of excise duty applicable for incandescent tobacco, which is consolidated in paragraph 1 (wording of 3 December 2019) of Article 65 of the Law on Excise Duty, inter alia, insofar as by means of such a legal regulation the objective of the protection of human health is achieved, is not a matter of constitutional review; there is no ground for stating that such a legal regulation would clearly deny the values consolidated, defended, and protected by the Constitution.

58. In the light of the foregoing arguments, it must be concluded that paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraph 1 of Article 37 (wording of 3 December 2019) and paragraph 3 of the same article of the Law on Excise Duty, insofar as it establishes that gas oils intended for use in the production of agricultural products by operators of agricultural activities, including aquaculture or commercial fishing in inland waters, shall be subject to an excise duty rate of EUR 60 per 1000 litres of product per year, up to the quantities of gas oil fixed by the Government, as well as paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, are not in conflict with paragraph 2 of Article 5 and paragraph 4 of Article 46 of the Constitution and with the constitutional principle of a state under the rule of law in terms of their content.

59. As mentioned above, the legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty was established in Article 3 of the Law Amending the Law on Excise Duty, the procedure for the entry into force of which is regulated in paragraph 2 of Article 8 of this law; the legal regulation consolidated in point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty was established respectively in Articles 4 and 5 of the Law Amending the Law on Excise Duty, the procedure for the entry into force of which is regulated in paragraph 1 of Article 8 of this law; the legal regulation consolidated in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty was established by the Law on Amending the Law Amending the Law on Excise Duty, the impugned paragraph 1 of Article 2 of which lays down the procedure for the entry into force of these provisions.

59.1. In the opinion of the petitioners, the persons subject to new (higher) rates of excise duty were entitled to reasonably expect a reasonable period (vacatio legis) to be set during which they would be able to prepare to pay these taxes. However, having held that the provisions of the laws amending the Law on Excise Duty enter into force on 1 January 2020 or on 1 March 2020, respectively (less than one or three month after the official publication of the respective laws), although there were no exceptional, constitutionally justified circumstances for such an urgent entry into force, the legislature disregarded the requirement stemming from the constitutional principle of a state under the rule of law to provide for an appropriate period of time for the entry into force of the said laws (parts thereof).

59.2. It has been mentioned that the Law Amending the Law on Excise Duty was adopted on 3 December 2019. This law was published in the Register of Legal Acts on 12 December 2019.

59.3. Article 8 “Entry into force of the Law” of the Law Amending the Law on Excise Duty provides:

1. This Law, with the exception of Article 3, shall enter into force on 1 January 2022.

2. Article 3 of this law shall come into force on 1 March 2020.”

59.4. It has been mentioned that Article 3 of the Law Amending the Law on Excise Duty amended paragraph 1 (wording of 11 December 2018) of Article 26 of the Law on Excise Duty, and, respectively, Articles 4 and 5 thereof amended the provisions of point 1 of Article 35 (wording of 23 September 2014) and Article 37 (as amended on 5 December 2017) of the Law on Excise Duty.

59.5. Consequently, under the impugned paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, on 1 January 2020, i.e. less than one month after the official publication of this law, inter alia, point 1 (wording of 3 December 2019) of Article 35 of the Law on Excise Duty, which, as mentioned before, established a new (higher) rate of excise duty for unleaded petrol and Article 37 (wording of 3 December 2019), which, inter alia, established new (higher) excise duty rates applied, respectively, on gas oils in general and gas oils intended for use in the production of agricultural products by operators of agricultural activities, came into force. Under the impugned paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, on 1 March 2020, i.e. less than three months after the official publication of this law, paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty establishing a new (higher) rate of excise duty for ethyl alcohol came into force.

60. It has been mentioned that the Law on Amending the Law Amending the Law on Excise Duty was adopted on 5 December 2019. This law, as mentioned before, amended the provisions of the Law Amending the Law on Excise Duty of 28 June 2018, regulating the amendment and entry into force of paragraph 1 of Article 65 of the Law on Excise Duty. The Law on Amending the Law Amending the Law on Excise Duty was published in the Register of Legal Acts on 19 December 2019.

60.1. Paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty amended paragraph 2 of Article 9 of the Law Amending the Law on Excise Duty of 28 June 2018, which, as mentioned before, laid down the date of the entry into force of paragraph 1 of Article 65 of the Law on Excise Duty of the respective wording.

Under the legal regulation laid down in paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, as amended by the said law, came into force on 1 March 2020.

60.2. Consequently, under the impugned paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, on 1 March 2020, i.e. less than three months after the official publication of this law, paragraph 1 (wording of 3 December 2019) of Article 65 of the Law on Excise Duty establishing a new (higher) rate of excise duty for incandescent tobacco products came into force.

61. It should also be noted from the aspect relevant to this constitutional justice case that Article 8 of the Law Amending the Law on Excise Duty and paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty consolidated an analogous legal regulation, in terms of its content, under which, respectively in less than one or three months, the amended respective provisions of the Law on Excise Duty came into force, which established respectively new (higher) rates of excise duty for ethyl alcohol, unleaded petrol, gas oils in general and gas oils intended for use in the production of agricultural products by operators of agricultural activities, incandescent tobacco products.

It should be noted that it is clear from the travaux préparatoires of the Law on the State Budget for 2020 that the Law Amending the Law on Excise Duty and the Law on Amending the Law Amending the Law on Excise Duty were submitted as the laws linked to the Law on the State Budget for 2020 (the explanatory note to the draft Law (No XIIIP-4014) on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020; the explanatory note to the draft Republic of Lithuania’s Law (No XIIIP-4014(2)) on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020, as improved by the proposals of the Committee on Budget and Finance of the Seimas of the Republic of Lithuania, other committees of the Seimas, commissions of the Seimas, state institutions and enterprises, as well as associations).

62. In assessing the constitutionality of Article 8 of the Law Amending the Law on Excise Duty and paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, to the specified extent, it should be noted that, as mentioned before:

under paragraph 1 of Article 70 of the Constitution, as interpreted in the context of the constitutional principle of a state under the rule of law, the legislature is, in certain cases, obliged to provide for a sufficient vacatio legis, i.e. a period of time from the moment of the official publication of the particular law until its entry into force (date of its application), during which the persons concerned would be able to prepare for the implementation of the requirements resulting from the law; a proper vacatio legis in the sphere of tax law is an important guarantee that persons (first of all, taxpayers) would be able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements;

under the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, the constitutional duty of the state to draw up a draft state budget and the constitutional duty of the Seimas to consider and approve it may not in itself be interpreted as creating the preconditions for deviating from the requirement, arising from the Constitution, to provide for a proper vacatio legis for the entry into force of tax laws, which establish duties or limitations with respect to persons; in other words, only the need to draw up and approve the state budget is not a constitutionally justifiable, particular, and objective circumstance substantiating the immediate entry into force of tax laws; otherwise, if the legislature were permitted to deviate from the constitutional requirement to provide for a proper vacatio legis for the entry into force of tax laws in the absence of a very difficult economic and financial situation as a result of particular circumstances each time when the state budget is prepared, considered, and approved, the preconditions would be created for a permanent practice of the immediate entry into force of tax laws and, therefore, the stability of the legal regulation of taxes would not be ensured and the legitimate interests and legitimate expectations of taxpayers would not be protected and respected.

62.1. It should be noted that the impugned paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, under which, on 1 January 2020, i.e. less than one month after the official publication of this law, inter alia, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force, paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, under which, on 1 March 2020, i.e. less than three months after the official publication of this law, paragraph 1 (wording of 3 December 2019) of Article 26 of the Law on Excise Duty came into force, and paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, under which, on 1 March 2020, i.e. less than three months after the official publication of this law, paragraph 1 (wording of 3 December 2019) of Article 65 of the Law on Excise Duty came into force, do not lay down a proper vacatio legis for the entry into force of the amended provisions of the Law on Excise Duty establishing new (higher) rates of excise duty for ethyl alcohol, unleaded petrol, some gas oils and incandescent tobacco.

Thus, having established such a legal regulation, the payers of the excise duties were not able not only to familiarise themselves with new requirements of the Law on Excise Duty in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements; therefore, their legitimate expectations and legitimate interests were violated and the stability of the legal regulation of taxes was not ensured.

62.2. Consequently, the legal regulation laid down in the impugned paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020, paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, disregarded the requirement, arising from the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, to provide for a proper vacatio legis for the entry into force of tax laws and not to deviate from that requirement in the absence of any extremely difficult economic and financial situation as a result of particular circumstances.

62.3. In the light of the foregoing, the conclusion should be drawn that the following are in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance:

paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020, and paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty;

paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020.

63. The petitioners also state that, when establishing the legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraphs 1 and 3 of Article 37 (wording of 3 December 2019) and paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, the legislature disregarded the prescribed procedure for adopting laws, therefore, the impugned legal regulation is in conflict with paragraph 1 of Article 69 of the Constitution.

Thus, the petitioners impugn the compliance of the said provisions of the Law on Excise Duty with the specified provisions of the Constitution in terms of the procedure of their adoption.

63.1. As mentioned before, the legal regulation consolidated in paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, and paragraphs 1 and 3 of Article 37 (wording of 3 December 2019) of the Law on Excise Duty was established by the Law on Amending the Law on Excise Duty and, in accordance with the provisions of paragraphs 1 and 2 of Article 8 of this law, entered into force on 1 January 2020 or on 1 March 2020, respectively.

It has also been mentioned that the legal regulation consolidated in paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty was established by the Law on Amending the Law Amending the Law on Excise Duty and, in accordance with paragraph 1 of Article 2 of this law, entered into force on 1 March 2020.

63.2. In this ruling, it has been held that paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020 and paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty and paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under this paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, are in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law.

This means that the procedure for the entry into force of the provisions of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraphs 1 and 3 of Article 37 (wording of 3 December 2019), and paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty does not comply with the Constitution.

63.3. In view of the above, in the constitutional justice case at issue, the Constitutional Court will not further examine whether paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, paragraphs 1 and 3 of Article 37 (wording of 3 December 2019), and paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty are in conflict with paragraph 1 of Article 69 of the Constitution in terms of the procedure of their adoption.

VII

The assessment of the compliance of the Law Amending the Law on Immovable Property Tax and the Law Amending the Law on Personal Income Tax with the Constitution

64. In this case of constitutional justice, the Constitutional Court investigates the compliance of the provisions of the Law Amending the Law on Immovable Property Tax and the Law Amending the Law on Personal Income Tax with paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

65. In the opinion of the petitioners, the persons who were, respectively, subject to new (higher) tax rates and/or amount of tax or who were subject to a substantial change in the legal regulation of taxes by having classified them as groups of persons liable to pay a certain tax, were entitled to reasonably expect a reasonable period (vacatio legis) to be set during which they would be able to prepare to pay these taxes. However, having established that these laws amending (supplementing) tax laws come into force on 1 January 2020 respectively (less than one month after the official publication of the respective laws), although there were no exceptional, constitutionally justified circumstances for such an urgent entry into force, the legislature disregarded the requirement stemming from the constitutional principle of a state under the rule of law to provide for an appropriate period of time for the entry into force of the said laws (parts thereof).

66. In this constitutional justice case, the Constitutional Court investigates whether paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, under which paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020, is in conflict with the Constitution.

66.1. On 12 December 2019, the Seimas adopted the Law Amending the Law on Immovable Property Tax, which amended some provisions of the Law on Immovable Property Tax, as well as established the procedure for their entry into force and application. This law was published in the Register of Legal Acts on 27 December 2019.

66.2. Paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax prescribes: “This law shall come into force on 1 January 2020.”

66.3. It should be noted from the aspect relevant to this constitutional justice case that Article 1 of the Law Amending the Law on Immovable Property Tax amended paragraph 1 (wording of 29 June 2012) of Article 6 of the Law on Immovable Property Tax and set it out as follows: “The tax rate shall range from 0.5 percent up to 3 percent of the taxable value of immovable property unless otherwise specified in this article.”

It should also be noted that paragraph 1 (wording of 29 June 2012) of Article 6 of the Law on Immovable Property Tax prescribed the following: “The tax rate shall range from 0.3 percent up to 3 percent of the taxable value of immovable property unless otherwise specified in this article.”

Thus, paragraph 1 (wording of 12 December 2019) of Article 6 of the Law on Immovable Property Tax established the higher lowest limit of the immovable property tax rate (increased from 0.3 percent up to 0.5 percent of the taxable value of immovable property); the upper limit of the immovable property tax rate – 3 percent of the tax value of immovable property – remained unchanged, i.e. this legal regulation introduced a new (higher) minimum tax rate on the immovable property.

Therefore, under the impugned paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, on 1 January 2020, i.e. several days after the official publication of this law, inter alia, paragraph 1 (wording of 12 December 2019) of Article 6 of the Law on Immovable Property Tax establishing a new (higher) minimum tax rate on the immovable property came into force.

66.4. It should also be noted from the aspect relevant to this constitutional justice case that paragraph 1 of Article 2 of the Law Amending the Law on Immovable Property Tax amended point 6 (wording of 5 December 2017) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, which established immovable property not subject to immovable property tax where the tax is paid by a natural person, and set it out as follows: “The total value of the structures (premises) intended for dwelling purposes, gardens, garages, homesteads, greenhouses, farms, subsidiary farms, science, religion, and recreation, fish-farming structures as well as engineering structures, belonging to natural persons by the right of ownership or acquired by them, not exceeding EUR 150 000”.

It should also be noted that point 6 (wording of 5 December 2017) of paragraph 1 of Article 7 of the Law on Immovable Property Tax established that the immovable property was not subject to immovable property tax where the tax was paid by a natural person where “the total value of the structures (premises) intended for dwelling purposes, gardens, garages, homesteads, greenhouses, farms, subsidiary farms, science, religion, and recreation, fish-farming structures as well as engineering structures, belonging to natural persons by the right of ownership or acquired by them, not exceeding EUR 220 000”.

Thus, point 6 (wording of 5 December 2017) of paragraph 1 of Article 7 of the Law on Immovable Property Tax established a lower (reduced from EUR 220 000 to EUR 150 000) total value of the non-taxable immovable property belonging to natural persons, i.e. under this legal regulation, some of the owners of immovable property (with immovable property with a value of more than EUR 150 000 but less than EUR 220 000) have been deprived of the immovable property tax relief by imposing an obligation to pay immovable property tax, thereby creating the preconditions for a respective extension of the group of taxpayers of immovable property tax. This means that the legal regulation established in point 6 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax substantially changed legal regulation of taxes for the said part of owners of immovable property.

Therefore, under the impugned paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, on 1 January 2020, i.e. several days after the official publication of this law, inter alia, point 6 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, under which, the said part of the owners have been deprived of the immovable property tax relief, i.e. they were subject to a substantial change in the legal regulation of taxes, came into force.

66.5. It should also be noted from the aspect relevant to this constitutional justice case that paragraph 2 of Article 2 of the Law Amending the Law on Immovable Property Tax amended point 7 (wording of 5 December 2017) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, which established immovable property not subject to immovable property tax where the tax is paid by a natural person, and set it out as follows: “for persons raising three or more children (adopted children) under the age of 18, and persons raising a disabled child (adopted child) under the age of 18, as well as an older disabled child (adopted child) for whom a special need for permanent care has been established, the total value of the immovable property referred to in point 6 of this paragraph, up to a maximum of EUR 200 000, owned or acquired by them.”

It should also be noted that point 7 (wording of 5 December 2017) of paragraph 1 of Article 7 of the Law on Immovable Property Tax established that the immovable property was not subject to immovable property tax where the tax was paid by a natural person where “for persons raising three or more children (adopted children) under the age of 18, and persons raising a disabled child (adopted child) under the age of 18, as well as an older disabled child (adopted child) for whom a special need for permanent care has been established, the total value of the immovable property referred to in point 6 of this paragraph, up to a maximum of EUR 286 000, owned or acquired by them”.

Thus, under point 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, a smaller (reduced from EUR 286 000 to EUR 200 000) total value of the non-taxable immovable property belonging to natural persons raising three and more children or a child with special needs was established, i.e. under this legal regulation, some of the owners of immovable property (raising three and more children or a child with special needs and owning immovable property with a value of more than EUR 200 000 but less than EUR 286 000) have been deprived of the immovable property tax relief by imposing an obligation to pay immovable property tax, thereby creating the preconditions for a respective extension of the group of taxpayers of immovable property tax. This means that the legal regulation established in point 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax substantially changed legal regulation of taxes for the said part of owners of immovable property.

Therefore, under the impugned paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, on 1 January 2020, i.e. several days after the official publication of the Law Amending the Law on Immovable Property Tax, inter alia, point 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, under which, the said part of the owners have been deprived of the immovable property tax relief, i.e. they were subject to a substantial change in the legal regulation of taxes, came into force.

67. In this constitutional justice case, the Constitutional Court examines whether paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, insofar as, under that paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020, is in conflict with the Constitution.

67.1. On 28 June 2018, the Seimas adopted the Law Amending the Law on Personal Income Tax, whose Article 2 supplemented Article 6 of the Law on Personal Income Tax regulating income tax rates with a new paragraph 11, which set a special (higher) personal income tax rate for persons receiving specified types of income, as well as established a few new wordings of paragraph 11 of Article 6 of the Law on Personal Income Tax, which, according to Article 7 of the Law Amending the Law on Personal Income Tax, had to enter into force at a different time (starting from 1 January 2019). This law was published in the Register of Legal Acts on 30 June 2018.

67.2. It should be noted from the aspect relevant to this constitutional justice case that paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax established that, inter alia, paragraph 11 of Article 6 of the Law on Personal Income Tax in the wording set out in paragraph 2 of Article 2 of this law comes into force on 1 January 2020, thus, one year and half after the official publication of the Law Amending the Law on Personal Income Tax.

67.3. It should be noted that the Law Amending the Law on Personal Income Tax was amended by the Seimas by the Republic of Lithuania’s Law (No XIII-1335) Amending Articles 2, 4, and 7 of the Law Amending Articles 2, 6, 16, 20, 21, and 27 of the Law (No IX-1007) on Personal Income Tax, which was adopted on 12 December 2019 and published in the Register of Legal Acts on 21 December 2019.

Paragraph 1 of Article 1 of this law amended paragraph 2 of Article 2 of the Law Amending the Law on Personal Income Tax which, under paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, came into force on 1 January 2020, thus, a few days after the official publication of the Law (No XIII-1335) Amending Articles 2, 4, and 7 of the Law Amending Articles 2, 6, 16, 20, 21, and 27 of the Law (No IX-1007) on Personal Income Tax.

67.4. It should be noted that paragraph 2 (wording of 12 December 2019) of Article 2 of the Law on Personal Income Tax establishes that paragraph 11 of Article 6 of the Law on Personal Income Tax shall be set out as follows:

The income of a resident from an employment relationship or a relationship corresponding to its substance (other than sickness, maternity, paternity, childcare, and long-term employment benefits), bonuses or remuneration for activities in the supervisory board or board of directors, in the form of a loan committee, paid instead of bonuses or together with them, income from a person linked to a resident’s employment relationship or a relationship corresponding to their substance, under copyright agreements, as well as income received under a civil (service) contract for management activities by the heads of small associations who are not members of those small associations under the Law of the Republic of Lithuania, shall be taxed as follows:

(1) the annual part of income not exceeding 84 national average wages applicable for the calculation of the state social security contribution base of insured persons for 2020 shall be taxed at the income tax rate of 20 percent;

(2) the annual part of income exceeding 84 national average wages applicable for the calculation of the state social security contribution base of insured persons for 2020 shall be taxed at the income tax rate of 32 percent.”

It should also be noted that paragraph 11 (wording of 28 June 2018) of Article 6 of the Law on Personal Income Tax prescribed the following:

The income of the resident [...] shall be taxed as follows:

(1) the annual part of income not exceeding 120 national average wages applicable for the calculation of the state social security contribution base of insured persons for 2019 shall be taxed at the income tax rate of 20 percent;

(2) the annual part of income exceeding 120 national average wages applicable for the calculation of the state social security contribution base of insured persons for 2019 shall be taxed at the income tax rate of 27 percent.”

Thus, under paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax, the reduction of the non-taxable amount from 120 average wages to 84 average wages resulted in the taxation of a part of the income of the population (such as income from an employment relationship or a relationship corresponding to its substance, bonuses or remuneration for work in the supervisory board) that has not been taxed until then; also, the specified income above 120 average wages is taxed at a higher income tax rate, increasing the personal income tax rate from 27 percent to 32 percent for the annual part of income. This means that paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax established an essentially different legal regulation of the taxation of specified kinds of personal income.

Consequently, under the impugned paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, on 1 January 2020, i.e. less than one month after the official publication of the Law (No XIII-1335) Amending Articles 2, 4, and 7 of the Law Amending Articles 2, 6, 16, 20, 21, and 27 of the Law (No IX-1007) on Personal Income Tax, inter alia, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax, entered into force, which established an essentially different legal regulation of the taxation of specified kinds of personal income.

68. It should also be noted from the aspect relevant to this constitutional justice case that paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, insofar as, under that paragraph, paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020, and paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, insofar as, under that paragraph, Paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020, consolidated an analogous legal regulation, in terms of its content, under which, less than one month after the official publication of these laws, the respective provisions of the Law on Immovable Property Tax and the Law on Personal Income Tax became effective, which established an essentially different legal regulation of taxes.

It should be noted that it is clear from the travaux préparatoires of the Law on the State Budget for 2020 that the Law Amending the Law on Immovable Property Tax and the Law Amending the Law on Personal Income Tax were submitted as the laws linked to the Law on the State Budget for 2020 (the explanatory note to the draft Law (No XIIIP-4014) on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020; the explanatory note to the draft Republic of Lithuania’s Law (No XIIIP-4014(2) on the Approval of Financial Indicators of the State Budget and Municipal Budgets for 2020, as improved by the proposals of the Committee on Budget and Finance of the Seimas of the Republic of Lithuania, other committees of the Seimas, commissions of the Seimas, state institutions and enterprises, as well as associations).

69. In assessing the constitutionality of paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, to the specified extent, and paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, to the specified extent, it should be noted that, as mentioned before:

under paragraph 1 of Article 70 of the Constitution, as interpreted in the context of the constitutional principle of a state under the rule of law, the legislature is, in certain cases, obliged to provide for a sufficient vacatio legis, i.e. a period of time from the moment of the official publication of the particular law until its entry into force (date of its application), during which the persons concerned would be able to prepare for the implementation of the requirements resulting from the law; a proper vacatio legis in the sphere of tax law is an important guarantee that persons (first of all, taxpayers) would be able not only to familiarise themselves with new requirements of tax laws in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements;

under the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, as interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, the constitutional duty of the state to draw up a draft state budget and the constitutional duty of the Seimas to consider and approve it may not in itself be interpreted as creating the preconditions for deviating from the requirement, arising from the Constitution, to provide for a proper vacatio legis for the entry into force of tax laws, which establish duties or limitations with respect to persons; in other words, only the need to draw up and approve the state budget is not a constitutionally justifiable, particular, and objective circumstance substantiating the immediate entry into force of tax laws; otherwise, if the legislature were permitted to deviate from the constitutional requirement to provide for a proper vacatio legis for the entry into force of tax laws in the absence of a very difficult economic and financial situation as a result of particular circumstances each time when the state budget is prepared, considered, and approved, the preconditions would be created for a permanent practice of the immediate entry into force of tax laws and, therefore, the stability of the legal regulation of taxes would not be ensured and the legitimate interests and legitimate expectations of taxpayers would not be protected and respected.

69.1. It should be noted that the impugned paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, under which paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020, and paragraph 2 of Article 7 of the Law Amending the Law on Personal Income Tax, under which, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020, do not lay down a proper vacatio legis for the entry into force of the amended provisions of the Law on Immovable Property Tax and the Law on Personal Income Tax establishing an essentially different legal regulation of taxes for certain groups of persons. Thus, having established such a legal regulation, the payers of immovable property tax and personal income tax, who are either subject to the obligation to pay the said taxes and/or to whom the tax rates had been increased, were not able not only to familiarise themselves with new requirements of the Law on Immovable Property Tax and the Law on Personal Income Tax, respectively, in advance, but also to adapt their property interests and perspectives of economic activity to the said requirements; therefore, their legitimate expectations and legitimate interests were violated and the stability of the legal regulation of taxes was not ensured.

Consequently, the impugned provisions of the Law Amending the Law on Immovable Property Tax and the Law Amending the Law on Personal Income Tax, under which, the substantially changed legal regulation of taxes came into force on 1 January 2020, disregarded the requirement, arising from the Constitution, inter alia, paragraph 2 of Article 5 and paragraph 1 of Article 70 thereof, interpreted in the context of the constitutional principles of a state under the rule of law and responsible governance, to provide for a proper vacatio legis for the entry into force of tax laws and not to deviate from that requirement in the absence of any extremely difficult economic and financial situation as a result of particular circumstances.

69.2. In view of the above, the conclusion should be drawn that the following are in conflict with paragraph 2 of Article 5 and paragraphs 1 of Article 70 of the Constitution, as well as with the constitutional principles of a state under the rule of law and responsible governance:

paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, insofar as, under this paragraph, paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020;

paragraph 2 of Article 7 of the Law on Personal Income Tax, insofar as, under that paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020.

VIII

On the official publication of this ruling of the Constitutional Court and the ensuing legal consequences

70. By this ruling of the Constitutional Court, paragraph 1 of Article 8 of the Law Amending the Law on Excise Duty, insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Law on Excise Duty came into force on 1 January 2020, paragraph 2 of Article 8 of the Law Amending the Law on Excise Duty, paragraph 1 of Article 2 of the Law on Amending the Law Amending the Law on Excise Duty, insofar as, under that paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty came into force on 1 March 2020, paragraph 1 of Article 3 of the Law Amending the Law on Immovable Property Tax, insofar as, under this paragraph, paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax came into force on 1 January 2020, paragraph 2 of Article 7 of the Law on Personal Income Tax, insofar as, under that paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax came into force on 1 January 2020, paragraph 1 of Article 13 of the Law Amending the Law on Corporate Tax, insofar as, under this paragraph, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax came into force on 1 January 2020, and Article 2 of the Law Amending the Law on the Tax on Lotteries and Games of Chance, insofar as, under this paragraph, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, were declared to be in conflict with the Constitution.

It has been mentioned that these laws amending the tax laws established respectively new (higher) excise duty rates for ethyl alcohol, unleaded petrol, gas oils in general, and gas oils intended for use in the production of agricultural products by operators of agricultural activities, incandescent tobacco products, new (higher) tax rates applicable for the lottery and gaming tax base and higher fixed amount of lottery and gaming fee for the respective gaming device, substantially amended the legal regulation of immovable property tax and personal income tax, and established a new additional corporate income tax of credit institutions.

71. Under Paragraph 1 of Article 107 of the Constitution, a legal act (or part thereof) may not be applied from the day of the official publication of the decision of the Constitutional Court that the legal act in question (or part thereof) is in conflict with the Constitution. As the Constitutional Court has repeatedly stated, any legal act (part thereof) adopted by the Seimas that is declared by a ruling of the Constitutional Court to be in conflict with the Constitution is removed from the legal system of Lithuania and may no longer be applied.

71.1. It has been held in the jurisprudence of the Constitutional Court that, under the Constitution, having assessed, inter alia, what a legal situation might arise after a ruling of the Constitutional Court becomes effective, the Constitutional Court may determine the date of the official publication of that ruling; the Constitutional Court enjoys the constitutional power to establish also a later date of the official publishing (thus, also of entry into force) of its ruling, whereby a certain legal act (part thereof) was recognised as being in conflict with higher-ranking legal acts, inter alia (and, first of all), the Constitution, where, in the case the ruling of the Constitutional Court after its adoption were immediately officially published, a vacuum or other indeterminacies might appear in the legal regulation due to which certain values consolidated in and defended and protected by the Constitution could be violated in essence (inter alia, the rulings of 19 January 2005, 9 June 2011, and 28 August 2020). Therefore, the postponement of the official publication of a ruling of the Constitutional Court (inter alia, a ruling by which a certain law (or part thereof) is ruled to be in conflict with the Constitution) is a precondition stemming from the Constitution for avoiding certain consequences unfavourable to society and the state, as well as to human rights and freedoms, that might arise if the respective ruling of the Constitutional Court were officially published immediately after its public pronouncement at the hearing of the Constitutional Court and if it became effective on the day of its official publication (inter alia, the rulings of 19 January 2005, 6 February 2012, and 28 August 2020).

71.2. It should be noted that, under paragraph 3 of Article 84 “The Publication and Entry into Force of the Acts of the Constitutional Court and Announcements of the President of the Constitutional Court” (wording of 14 May 2015) of the Law on the Constitutional Court, taking into account the specific circumstances of a particular case, the Constitutional Court may set another, a later, date for the publication of its ruling by which a certain legal act (part thereof) is declared to be in conflict with the Constitution or laws.

71.3. According to the Constitution and the Law on the Constitutional Court, after the official publication of this ruling of the Constitutional Court, as from the date of its official publication, the provisions of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, Article 37 (wording of 3 December 2019), and paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, and paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, which entered into force in accordance with the legal regulation recognised as conflicting with the Constitution, will no longer be applicable and will be removed from the legal system.

71.3.1. Under paragraph 2 of Article 127 of the Constitution, the revenue of the state budget is raised from taxes, compulsory payments, levies, income from state-owned property, and other income. As mentioned before, taxes form an essential part of the financial system of the state and that they constitute the main part of the revenue of the state budget; the establishment of taxes is aimed at receiving revenue to perform the functions of the state and to meet the public needs of both society and the state; when taxes are not paid or are overdue, the state budget does not receive part of its revenue, and the possibilities for the state to perform the functions established for it are limited.

71.3.2. Thus, if a ruling of the Constitutional Court in this constitutional justice case were officially published right after its public pronouncement at the hearing of the Constitutional Court, not only regulatory gaps and uncertainties of the legal regulation laid down in the said tax laws would occur but also the collection of estimated revenue from the fixed taxes into the state budget of 2021 could be disrupted and the ability of the state to perform the functions assigned to it would be restricted.

71.3.3. In view of this, as well as the specific nature of the planning and preparation of the state budget, this ruling of the Constitutional Court must be officially published in the Register of Legal Acts and will come into force on 1 July 2022.

72. It should also be noted that, when interpreting paragraph 1 of Article 107 of the Constitution, the Constitutional Court has disclosed the content (which arises from the said paragraph) of the presumption of the constitutionality of legal acts and the lawfulness of the consequences of their application, which stems from the Constitution: the provision of paragraph 1 of Article 107 of the Constitution, whereby a law (part thereof) may not be applied from the day of the official publication of the decision of the Constitutional Court that the act in question (part thereof) is in conflict with the Constitution, means that, as long as the Constitutional Court has not officially published the decision that a certain legal act (part thereof) is in conflict with the Constitution, it is presumed that such a legal act (part thereof) is in compliance with the Constitution and that the legal consequences that have appeared on the basis of the act in question are lawful (inter alia, the rulings of 30 December 2003, 25 October 2011, and 18 December 2019).

72.1. In the context of the constitutional justice case at issue, it should be noted that the presumption of the legitimacy of the legal consequences resulting from the provisions of paragraph 1 (wording of 3 December 2019) of Article 26, point 1 (wording of 3 December 2019) of Article 35, Article 37 (wording of 3 December 2019), and paragraph 1 (wording of 5 December 2019) of Article 65 of the Law on Excise Duty, paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Law on Immovable Property Tax, paragraph 11 (wording of 12 December 2019) of Article 6 of the Law on Personal Income Tax, Article 383 (wording of 17 December 2019) of the Law on Corporate Income Tax, and paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Law on the Tax on Lotteries and Games of Chance, which entered into force in accordance with the legal regulation recognised as conflicting with the Constitution and will no longer be applicable from the day of the official publication of this ruling of the Constitutional Court, has not been denied.

72.2. Thus, taking into account the fact that the Constitutional Court stressed in this ruling that the said laws (or parts thereof) amending the tax laws were declared unconstitutional does not in itself provide grounds for challenging in the courts the lawfulness of paid taxes established by those legal acts, inter alia, in order to recover the said taxes.

73. As mentioned before, any legal act (part thereof) of the Seimas that is declared by a ruling of the Constitutional Court to be in conflict with Constitution is removed from the legal system of Lithuania and may no longer be applied.

73.1. It should be noted that, when planning the state budget for the following year and seeking to re-adopt the laws amending tax laws impugned by the petitioners, which were, in this constitutional justice case, declared unconstitutional in terms of the procedure for their adoption, the legislature must respect the requirement stemming from the Constitution, inter alia, the constitutional principles of a state under the rule of law and responsible governance, to provide for a proper period of time (vacatio legis) for the entry into force of these laws during which persons subject to the obligation to pay the relevant taxes (first of all, taxpayers), would have a real possibility to adapt to a new legal situation and to adapt their property interests and perspectives of economic activity to the said requirements.

73.2. It should also be noted that, when re-adopting the laws amending tax laws, which were, in this constitutional justice case, declared unconstitutional, the legislature must also respect the imperatives stemming from paragraph 2 of Article 5, paragraph 1 of Article 69, and paragraph 1 of Article 70 of the Constitution and the constitutional principles of a state under the rule of law and responsible governance and must not violate the procedure for the adoption and entry into force of such laws, which is consolidated in the laws if they are not in conflict with the Constitution.

74. In this context, it should be noted that the concept of constitutional justice, which stems from the Constitution, implies not a perfunctory and nominal constitutional justice, but such final acts of the Constitutional Court that are not unjust according to their content; otherwise, without creating the possibility for the Constitutional Court to adopt, in accordance with the powers conferred upon it, such a final act that would meet the criteria of justice, the supremacy of the Constitution in the legal system would not be guaranteed and the administration of constitutional justice and the ensuring of constitutional lawfulness would be prevented (rulings of 19 June 2018 and 16 April 2019).

74.1. By means of this ruling, the Constitutional Court declared unconstitutional the provision of Paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” and the provision of Paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration “to laws amending the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year”.

74.2. It should be noted that, from the day of publication of this ruling of the Constitutional Court at the hearing of the Constitutional Court, in view of the fact that, under the Constitution, as mentioned before, the need to draw up and approve the state budget is not a constitutionally justifiable, particular and objective circumstance substantiating the immediate entry into force of tax laws, the exception to the general rule on the entry into force of tax laws not earlier than after six months, which is consolidated in the provision of paragraph 3 (wording of 23 June 2020) of Article 20 of the Law on the Legislative Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” and the provision of paragraph 4 (wording of 30 June 2020) of Article 3 of the Law on Tax Administration “to the amendments of the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year”, will not apply for the entry into force of laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year. A different interpretation of this ruling of the Constitutional Court that the said the exception to the general rule on the entry into force of tax laws not earlier than after six months could allegedly be applied for the entry into force of laws amending (supplementing) the tax laws related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year from the publication of this ruling of the Constitutional Court at the hearing of the Constitutional Court until its official publication in the Register of Legal Acts would be incompatible with the concept of constitutional justice and constitutional legality.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 531, 54, 55, 56, and 84 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

1. To recognise that the provision of paragraph 3 (wording of 23 June 2020; the Register of Legal Acts, 29-06-2020, No 14360) of Article 20 of the Republic of Lithuania’s Law on the Legislation Framework “to laws amending (supplementing) the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania and the constitutional principles of a state under the rule of law and responsible governance.

2. To recognise that the provision of paragraph 4 (wording of 30 June 2020; the Register of Legal Acts, 30-06-2020, No 15875) of Article 3 of the Republic of Lithuania’s Law on Tax Administration “to the amendments of the tax laws of the Republic of Lithuania related to the law on the approval of financial indicators of the state budget and municipal budgets of the relevant year” is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

3. To recognise that paragraph 1 of Article 13 of the Republic of Lithuania’s Law Amending Articles 2, 4, 12, 14, 30, 31, 55, 561 of, and Appendix 3 to, the Law (No IX-675) on Corporate Income Tax, as well as Supplementing the Law with Articles 383, 402, and 562 (Register of Legal Acts, 30-12-2019, No 21550), insofar as, under that paragraph, Article 383 (wording of 17 December 2019) of the Republic of Lithuania’s Law on Corporate Income Tax came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

4. To recognise that Article 2 of the Republic of Lithuania’s Law Amending Article 5 of the Law (No IX-326) on the Tax on Lotteries and Games of Chance (Register of Legal Acts, 20-12-2019, No 20807), insofar as, under that article, paragraphs 2, 21, and 3 of Article 5 (wording of 10 December 2019) of the Republic of Lithuania’s Law on the Tax on Lotteries and Games of Chance came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

5. To recognise that paragraph 1 of Article 8 of the Republic of Lithuania’s Law Amending Articles 9, 10, 26, 35, 37, 61, and 67 of the Law (No IX-569) on Excise Duty (Register of Legal Acts, 12-12-2019, No 20017), insofar as, under that paragraph, point 1 (wording of 3 December 2019) of Article 35 and Article 37 (wording of 3 December 2019) of the Republic of Lithuania’s Law on Excise Duty came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

6. To recognise that paragraph 2 of Article 8 of the Republic of Lithuania’s Law Amending Articles 9, 10, 26, 35, 37, 61, and 67 of the Law (No IX-569) on Excise Duty (Register of Legal Acts, 12-12-2019, No 20017) is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

7. To recognise that paragraph 1 of Article 2 of the Republic of Lithuania’s Law Amending Articles 1, 2, 3, 30, and 31 of the Law (No IX-569) on Excise Duty and Amending Articles 8 and 9 of the Law (No XII-1327) Amending Chapters II and III, insofar as, under this paragraph, paragraph 1 (wording of 5 December 2019) of Article 65 of the Republic of Lithuania’s Law on Excise Duty came into force on 1 March 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

8. To recognise that paragraph 1 of Article 3 of the Republic of Lithuania’s Law Amending Articles 6 and 7 of the Law (No X-233) on Immovable Property Tax (Register of Legal Acts, 27-12-2019, No 21307), insofar as, under this paragraph, paragraph 1 (wording of 12 December 2019) of Article 6 and points 6 and 7 (wording of 12 December 2019) of paragraph 1 of Article 7 of the Republic of Lithuania’s Law on Immovable Property Tax came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

9. To recognise that paragraph 2 of Article 7 of the Republic of Lithuania’s Law Amending Articles 2, 6, 16, 20, 21, and 27 of the Law (No IX-1007) on Personal Income Tax (Register of Legal Acts, 30-06-2018, No 10977), insofar as, under this paragraph, paragraph 11 (wording of 12 December 2019) of Article 6 of the Republic of Lithuania’s Law on Personal Income Tax came into force on 1 January 2020, is in conflict with paragraph 2 of Article 5 and paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania, as well as with the constitutional principles of a state under the rule of law and responsible governance.

10. This ruling of the Constitutional Court of the Republic of Lithuania must be officially published in the Register of Legal Acts on 1 July 2022.

This ruling of the Constitutional Court is final and not subject to appeal.

Justices of the Constitutional Court: Elvyra Baltutytė

                                                                     Gintaras Goda

                                                                      Vytautas Greičius

                                                                      Danutė Jočienė

                                                                      Giedrė Lastauskienė

                                                                      Algis Norkūnas

                                                                      Daiva Petrylaitė

                                                                      Janina Stripeikienė

                                                                      Dainius Žalimas